[bannie]

Suppose you have two levels of activities and costs as follows:
Highest level of activity is 10,000 lowest is 6,000.
Highest cost is 35,000 while lowest cost is 27,000.
Use the high low method to calculate the fixed cost.

[hamzashakaa]

I will not answer your question but here is an example:

Suppose you have two levels of activities and costs as follows:

Activity (Machine hours) Total Cost

1,000,000 $80,000
2,000,000 $150,000

Variable cost per unit= Difference between the highest cost and the lowest cost divided by the difference in the highest level of activity and the lowest level
(150000-80000)/(2000000-1000000)=0.07
multiply the rate by the hifhest or lowest level of activity. Lets multiply it by the highest level of activity (0.07*2000000)=140000 and deduct the amount from the highest cost (150000-140000)=10000 so the fixed cost is 10000

[jutkasuzana]

Thank you so much. I read my school book 100 times and still couldn't understand than I read your instructions and it was as easy as possible.

[Theroro]

variable cost per unit =Highest Cost -Lowest cost/Highest units-lowest units
= 35,000- 27,000 / 10,000-6,000
= 8,000 / 4,000
= $2
variable cost for producing10,000units will be 10,000*2= $20,000

total cost =Fixed cost + total variable cost
using highest activity level I e 10,000 units we substitute the known figures

35,000=Fixed Cost +20,000

Fixed Cost =35,000-20000
=$15,000