How Do You Use The High-Low Method In Semivariable Cost Analysis?
When the relationship between fixed and variable costs is linear, the high-low method can be used to estimate the variable unit cost. The high-low method equation is: variable unit cost = (high activity level cost – low activity level cost)/(high activity level -low activity level) or variable unit cost = change in cost/change in activity This article demonstrates through example how to use the high-low method in semivariable cost analysis. Information from the following problem is used. The Qwerty company is performing financial analysis of semivariable cost. The high activity level was 5,000 units with a cost of $11,000. The low activity level was 2,000 units with a cost of $5,200. What was the variable unit cost? Gather together all the information needed. high activity level cost = $11,000 low activity level cost = $5,200 high activity level = 5,000 low activity level = 2,000 Plug the information into the high-low formula. variable unit cost = (high activity level cost – low activi
