How Do You Find Variable Cost Per Unit Using High-Low Method?
One of the more important functions of Management Accounting is examining the principles of cost behavior. Whether you are a manager, business owner or business student knowing the way costs react to changes in activity levels are a key concept. This usually involves situations where costs are mixed. This means there are fixed AND variable costs that need to be separated first before measuring. One of the easiest methods to do this is using the high low method. Know the difference between “Fixed” and “Variable” costs. Fixed costs are those that do not change regardless of the level of change in activity (activity can be a number of cost drivers, or measures of output, such as labor or machine hours or whichever “activity” your specific situation uses). Variable costs are those that do move in relation to fluctuations in activity. For example, the total variable costs move in relation to the units produced or sold. (see the “Tips” section below for one more note on variable costs) To us
