High low method

Fuchsia

We went over the high low method at college the other day, and I was wondering why we aren't encouraged to use y = mx + c to calculate the fixed and variable costs of something given that we're looking at values that when plotted would create a straight line graph.

Is the high low method expanded on later to calculate more complicated examples or other values for analysis, or is it just a bit of a convoluted way of going about it? I've been perfectly comfortable with my equations for years and years, and I'm confused as to why they do it this way. :glare:

SandyHood

Fuchsia
You have a method that works perfectly well.
Don't worry.

Hi-low suits other people as a way of finding m and c
but this expression hi-low method does not appear in the unit standards, so there should not be either questions that specifically ask for it to be used (by name) to identify the fixed (c bit) or unit variable (m bit) in a semi-variable cost.

I won't knock it any more than I would knock y = mx + c as another method to find the same information.

I would be very surprised if your class as a whole were fans of equations. I tend to have classes made up of people who have accounting experience but only vague memories of their school maths classes. For them, the telephone bill is often a good example of a cost made up of a fixed part (line rental) and a cost per unit consumed (variable), and for us mastering the topic without having to know there is an equation is a benefit.

Fuchsia

Hello SandyHood,

My teacher told me that using equations wouldn't be acceptable and that I have to use the high low method, which surprised me somewhat because there must be a reasonable number of relatively young students who remember some of their maths gcse. I agree that it's good for students who aren't familiar with equations, but I wondered if there was a reason for the AAT enforcing it (which is obviously just my teacher, not the AAT!)

Maybe it's my fault for being geeky and using these things often enough to remember them. :laugh:

SandyHood

I have taken the following quote from (page 15)

http://www.aat.org.uk/servlet/file/Support%20booklet%20for%20ECR%20%28unit%206%29.pdf?ITEM_ENT_ID=24763&COLLSPEC_ENT_ID=34

Section 2 will assess competence in element 6.3. Examples of tasks that may be assessed in this
section include:
• The separation of variable and fixed costs and the effect of changing capacity levels

This is the examiner's amplification of the standards Support Booklet
I am surprised how few people use these free publications as they give a clear idea of the interpretation the examiner has taken on the standards.

As I think you realise, it does not say Hi-Low method let alone Hi-Low method must be used.

To be quite honest, I vaguely recollect Les Nightingale saying he felt hi-lo was not suitable at intermediate level and he would not test it as part of ECR