High-Low Method Calculator
High-Low Method Calculator
A company’s electricity costs were $5,000 when production was 10,000 units and $7,000 when production reached 20,000 units, high-low method calculator use these data points to calculate the fixed and variable components of the electricity cost.
High-Low Method Examples Chart
| Industry | Low Activity | Low Cost | High Activity | High Cost | Fixed Cost | Variable Cost per Unit |
|---|---|---|---|---|---|---|
| Manufacturing | 5,000 units | $15,000 | 12,000 units | $24,000 | $9,000 | $1.29 |
| Retail | 1,000 sales | $8,000 | 3,000 sales | $14,000 | $5,000 | $3.00 |
| Service | 100 hours | $4,000 | 250 hours | $7,500 | $2,500 | $20.00 |
| Transportation | 5,000 miles | $10,000 | 15,000 miles | $20,000 | $5,000 | $1.00 |
| Technology | 500 users | $12,000 | 2,000 users | $27,000 | $7,500 | $13.00 |
High-Low Method Calculation Formula
The High-Low Method Calculation Formula involves several steps:
Calculate the variable cost per unit:
Variable cost per unit = (High cost - Low cost) / (High activity - Low activity)Calculate the total variable cost at the high activity level:
Total variable cost = Variable cost per unit * High activity levelCalculate the fixed cost:
Fixed cost = High cost - Total variable costA company’s electricity costs were $5,000 at 10,000 units of production and $7,000 at 20,000 units.
Variable cost per unit = ($7,000 – $5,000) / (20,000 – 10,000) = $0.20 per unit
Total variable cost at high activity = $0.20 20,000 = *$4,000
Fixed cost = $7,000 – $4,000 = $3,000
The company’s electricity cost can be expressed as: $3,000 fixed cost plus $0.20 per unit produced.
How do you calculate high-low method?
The High-Low Method is calculated by following these steps:
Identify the highest and lowest activity levels and their corresponding costs.
Calculate the variable cost rate by dividing the difference in costs by the difference in activity levels.
Compute the total variable cost at the high activity level.
Determine the fixed cost by subtracting the total variable cost from the total cost at the high activity level.
A company’s maintenance costs were $8,000 when production was 5,000 units and $11,000 when production was 8,000 units.
High: 8,000 units, $11,000 | Low: 5,000 units, $8,000
Variable cost rate = ($11,000 – $8,000) / (8,000 – 5,000) = $1 per unit
Total variable cost at high activity = $1 8,000 = *$8,000
Fixed cost = $11,000 – $8,000 = $3,000
Therefore, the maintenance cost can be expressed as $3,000 fixed plus $1 per unit produced.