hi/lo method making me feel very low! Help please!

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Hello to all of you magnanimous fellow students who have been gracious enough to read this!<BR><BR>I have sat the devolved assessment for intermediate RCI last friday and got stuck on the hi/lo method! Basically I can go as far as finding the variable but can never understand how the fixed cost element is found.....can someone help me get this in my single cell brain?! Many thanks, M.

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    hi/lo method making me feel very low! Help please!

    total cost=TC<BR>Cost per unit=A<BR>Number of units=Q<BR>Fixed cost=FC<BR> <BR>TC=FC+A*Q<BR>FC=TC-A*Q
  • System
    System Posts: 100,534 🤖 Admin 🤖
    hi/lo method making me feel very low! Help please!

    Ok so you got your variable cost by taking one form the other, divide it by the difference in hi/lo units to get variable £ per unit.<BR>Go back to the figures and multiply this by the number of units to get total variable cost then deduct the amount from the total, fixed cost element remains.<BR><BR>eg hi 90 000 units £160 000 <BR> lo 60 000 units £130 000 <BR><BR>90 000-60 000=30 000 units<BR>£160 000-£130 000= £30 000<BR><BR>£30 000/30 000 units = £1 per unit variable cost<BR><BR>£1 x 60 000 units = £60 000 is the variable cost <BR>£130 000-£60 000 = £70 000, the fixed element.<BR><BR>Hope that helps !
  • System
    System Posts: 100,534 🤖 Admin 🤖
    hi/lo method making me feel very low! Help please!

    Minerva<BR>Hi/Lo on the RCI paper is a worry. It is not in the syllabus for RCI. <BR>Hi/Lo is in Paper 9 (PCR/PAR)<BR>and most easily explained in a table format. This might not work but I'll try it here.<BR><BR>Example<BR>The heating cost for a business was 1800 for quarter 3 and 1500 for quarter 4 <BR>The units of electricty used were 600 in quarter 3 and 300 in quarter 4. <BR>(quarter 3 has the HIGH values and quarter 4 has the LOW values)<BR><BR>Calculation........Units of Electricity.........Cost £s<BR>Quarter 3..........800...............................2550<BR>Quarter 4..........600...............................1950 <BR>Difference..........200.................................600 <BR><BR>To find the variable cost per unit of electricity :- £600/200 = £3<BR><BR>To find the Fixed cost part of each bill:-<BR>................................................................£<BR>Quarter 3 Total Cost................................2550 <BR>Total Variable Cost (£3 x 800 units) ....2400<BR>Difference is Fixed Cost..........................150 <BR> <BR>

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