Hi, can anyone tell me: if I have 2 total costs and the number of units, how do I work out the variable and fixed costs please?

• You'll want to use the high low method to work out the two costs.

Cost 1 (Large)= C1
Cost 2 (Small)= C2
Units 1 (Large)= U1
Units 2 (Small) = U2

The fixed costs in C1 and C2 will be the same amount. This means when you subtract one from the other the fixed costs are removed and the only part remaining is due to the variable cost. If you divide this by the difference in units then you'll have the variable cost per unit.

(C1-C2)/(U1-U2) = Variable cost per unit.

You can use the variable cost per unit to find the fixed cost from either total and then use the other to check your answers.

Variable cost * U1 + Fixed Cost = C1.

As an example lets have the 2 costs be £1200 and £2200 with the units being 10 and 20 respectively.

Variable = (2200-1200)/(20-10) = £100 /unit

100 * 10 + Fixed = £1,200

Fixed = £200

Check

100 * 20 + 200 = 2200

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