Question

Please describe the High-Low method and explain how it is used to break costs into the Variable and Fixed portions

Answer 1

Please describe the High-Low method and explain how it is used to break costs into the Variable and Fixed portions.

Answer;-

High-low method is used to isolate fixed cost and variable cost of a product or organization with a given data series of mixed cost. This strategy dependent on the way that settled expense is consistent over the whole time frames. High-low technique watches the most noteworthy and least expense of the arrangement and accepting settled expense to be equivalent in the two cases, isolates the variable expense with given movement levels according to the underneath condition:

Variable cost = (Total cost of high activity – Total cost low activity) / (Highest activity unit – Lowest activity unit)

In the wake of registering variable cost, settled expense can be effectively determined by placing it in any dimension of aggregate expense as:

Total cost = (Variable cost per unit x Units produced) + Total fixed cost

Variable cost per unit = (Total cost - Total fixed cost)/ Units produced.

Fixed and variable cost can be segregate as follows:

Variable cost = (Total cost of high activity – Total cost low activity) / (Highest activity unit – Lowest activity unit)

Total cost = (Variable cost per unit x Units produced) + Total fixed cost …

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