Question

The high-low method calculates the total fixed cost as the: Group of answer choices

a. difference between the unit variable cost and the unit total cost
b. change in activity level divided by the change in cost for two points
c. difference between total variable costs and total costs at a particular activity level
d. change in cost divided by the change in activity level for two points

Answer 1

c. difference between total variable costs and total costs at a particular activity level

Step-by-step explanation:

The high low method consists of calculating costs on the basis of highest & lowest activity & comparing their corresponding total costs.

Variable cost per unit is found by : change in cost divided by the change in activity level for two points

Variable Cost per unit = Highest activity cost - Lowest activity cost

Highest activity units - lowest activity units

Fixed Cost is thereafter calculated by subtracting Total Variable Costs from Total Cost

Fixed Cost = Highest Activity Total Cost - [ (Variable cost per unit) x (highest activity units)

Fixed Cost = Lowest Activity Cost - [ (Variable cost per unit) x (lowest activity units)]