# high-low method

Registered Posts: 7
Hi,
I hope you are all OK and safe.
I would like to ask a question regarding high-low method .
How shall I proceed when I have a question similar to the below
Units Cost
25000 575000
20000 450000
fixed costs step up to 50000 when volume exceed 240000.

G.

• Registered, Tutor Posts: 225
I hope you meant that the fixed costs step up BY £50,000

Units change from 20,000 to 25,000 an increase of 5,000 units
Costs change from £450,000 to £575,000 an increase of £125,000 but £50,000 of this is the increase in fixed costs, so variable costs increase by £75,000 (125,000 - 50,000)

If 5,000 extra units cost £75,000
then
1 extra unit costs £15 (£75,000/5,000). This is the variable cost per unit

When we make 20,000 units, total costs are £450,000
Variable costs are £300,000 (£15 x 20,000)
so fixed costs are £450,000 - £300,000 = £150,000

• Registered Posts: 7
Thanks.
The volume exceed 24000 units not 240000 I have added one extra zero by mistake...sorry!

Can you please clarify why you choose 20000 units and 450000at the end? Could I have chosen 25000units and 575000,or it would be a mistake?