High low method

kerrybo23112005

Hi. Could anyone help me please.
I am struggling on the high low method level 2 where I have to find the fixed cost. Would anyone be able to go through this with me please. Thank you x

anony123

I can’t believe I still remember this.

The high low method is when you find the highest cost- the lowest cost. Then you need to find the highest activity level and the lowest activity level and divide them both. This is the variable cost.

Then either get the highest cost or lowest cost - (variable cost * activity level) and this equals the fixed cost.

It is used to find semi variable costs that have a fixed cost and a certain activity level for example electricity, water and gas etc.

anony123

I sat level 2 back in 2022, but is this for elements of costing. It may not make sense in words that the thing.

Highest cost- lowest cost divided by
Highest activity level - lowest activity level

For this you will get the variable cost per unit.

Then you need to plug it in either to the highest or lowest cost.

E.G highest cost- (variable cost times times highest activity level) gives you the fixed cost

Lowest cost - (variable cost times lowest activity level) you will get the same answer for both the examples.