Question
In: Accounting
What is the high-low method? Why would an organization use this method? What are the benefits...
What is the high-low method? Why would an organization use this method? What are the benefits and pitfalls? Justify your answers
Proverbs 15:22 states: “Without deliberation plans came to nothing, where counselors are many, plans succeed.” How does this tie back to costing standards?
Solutions
Expert Solution
The high low method is one the methods used by companies in cost accounting. This helps the company to identify or get a split between fixed and variable cost. It is done in such a way that the lowest level of activity and also the highest levl of activity is taken and then from these two, fixed cost is determined and also the variable cost per unit is determned.
The main reason organisation's would use this method is to get an understanding of the fixed and variable cost and this would help them in planning gor the future and also to take some crucial decisions.
An advantage of using the high low method is that it is very simply to do and doesnt require any high level information or anything of that sort. It can be carried out using the basic data that we have available, that is our daily expenses are more than enough for using the high low method.
A possible disadvantage could be that the high low method only gives an approximate and not the exact figure. So in case a company is looking for the exact figure to take their decision, then it could be a problem because high low method will not be able to give the answer to the dollar.
Hope this answers the question. If you liked the answer please give an up-vote. It would be highly encouraging for me. Thank You.
ekkarill92 answered 1 year agoRelated Solutions
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1. High-Low Method for a Service Company Boston Railroad decided to use the high-low method and...
1.
High-Low Method for a Service Company
Boston Railroad decided to use the high-low method and operating
data from the past six months to estimate the fixed and variable
components of transportation costs. The activity base used by
Boston Railroad is a measure of railroad operating activity, termed
“gross-ton miles,” which is the total number of tons multiplied by
the miles moved.
Transportation Costs
Gross-Ton Miles
January
$854,100
325,000
February
952,200
363,000
March
673,000
235,000
April
913,000
351,000
May
765,700...
1. High-Low Method for a Service Company Boston Railroad decided to use the high-low method and...
1. High-Low Method for a Service Company
Boston Railroad decided to use the high-low method and operating
data from the past six months to estimate the fixed and variable
components of transportation costs. The activity base used by
Boston Railroad is a measure of railroad operating activity, termed
“gross-ton miles,” which is the total number of tons multiplied by
the miles moved.
Transportation Costs
Gross-Ton Miles
January
$929,600
247,000
February
1,036,400
276,000
March
732,500
179,000
April
993,700
268,000
May
833,400...
High-low method Ziegler Inc. has decided to use the high-low method to estimate the total cost...
High-low method
Ziegler Inc. has decided to use the high-low method to estimate
the total cost and the fixed and variable cost components of the
total cost. The data for various levels of production are as
follows:
Units Produced
Total Costs
104,500
$30,703,250
119,500
33,380,750
136,500
36,415,250
This information has been collected in the Microsoft Excel
Online file. Open the spreadsheet, perform the required analysis,
and input your answers in the questions below.
Determine the variable cost per unit and...
High-Low Method, Cost Formulas During the past year, the high and low use of three different...
High-Low Method, Cost Formulas During the past year, the high
and low use of three different resources for Fly High Airlines
occurred in July and April. The resources are airplane
depreciation, fuel, and airplane maintenance. The number of
airplane flight hours is the driver. The total costs of the three
resources and the related number of airplane flight hours are as
follows: Resource Airplane Flight Hours Total Cost Airplane
depreciation: High 44,000 $ 18,400,000 Low 28,000 $ 18,400,000
Fuel: High...
High-Low Method, Cost Formulas During the past year, the high and low use of three different...
High-Low Method, Cost Formulas
During the past year, the high and low use of three different
resources for Fly High Airlines occurred in July and April. The
resources are airplane depreciation, fuel, and airplane
maintenance. The number of airplane flight hours is the driver. The
total costs of the three resources and the related number of
airplane flight hours are as follows:
Resource
Airplane Flight
Hours
Total Cost
Airplane depreciation:
High
44,000
$ 18,000,000
Low
28,000
$ 18,000,000
Fuel:
High...
Please answer both. High-Low Method for a Service Company Boston Railroad decided to use the high-low...
Please answer both.
High-Low Method for a Service Company
Boston Railroad decided to use the high-low method and operating
data from the past six months to estimate the fixed and variable
components of transportation costs. The activity base used by
Boston Railroad is a measure of railroad operating activity, termed
"gross-ton miles," which is the total number of tons multiplied by
the miles moved.
Transportation Costs
Gross-Ton Miles
January
$1,008,400
298,000
February
1,124,300
333,000
March
794,600
216,000
April
1,078,000
323,000...
Question One High-Low Method, High—Low Method, Cost Formulas (LO 3) During the past year, the high...
Question One
High-Low Method, High—Low
Method, Cost Formulas (LO 3)
During the past year, the high and low
use of three different resources for Wilson Trucking occurred in
July and April.
The resources are truck depreciation,
fuel, and truck maintenance.
The number of kilometres travelled is
the driver. The total costs of the three resources and the related
number of truck kilometres are as follows:
Resource
Truck Kilometres Total Cost ($)
Truck depreciation:
High
46,000,000 2,800,000
Low
32,400,000 2,800,000
Fuel:...
This is a special order problem that also requires that you use the high low method...
This is a special order problem that also requires that
you use the high low method to estimate some cost function
parameters, so you may want to review the high-low method lectures
in Module 1. As with almost all of the analyses that we have done,
determining variable and fixed costs, and knowing what to do with
them, is critical.
______________________________________________________
Huang Automotive is presently operating at 75% of capacity. The
company recently received an offer from a Korean truck...
This is a special order problem that also requires that you use the high low method...
This is a special order problem that also requires that
you use the high low method to estimate some cost function
parameters, so you may want to review the high-low method lectures
in Module 1. As with almost all of the analyses that we have done,
determining variable and fixed costs, and knowing what to do with
them, is critical.
______________________________________________________
Huang Automotive is presently operating at 75% of capacity. The
company recently received an offer from a Korean truck...
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