ECONOMICS

Detailed explanation-1: -The high-low method is used to calculate the variable and fixed cost of a product or entity with mixed costs. It takes two factors into consideration. It considers the total dollars of the mixed costs at the highest volume of activity and the total dollars of the mixed costs at the lowest volume of activity.

Detailed explanation-2: -There are three widely used methods of separating mixed costs into their fixed and variable components: the high-low method, the scatterplot method, and the method of least squares. The high-low method uses two points to determine the equation of the cost line.

Detailed explanation-3: -High-low method formula First you calculate the variable cost component and fixed cost component, then plug the results into the cost model formula. Once you have the variable cost per unit, you can calculate the fixed cost.

Detailed explanation-4: -The formula for the High-Low Method It is calculated by deducting the product of variable cost per unit and the highest activity units from the highest activity cost or by deducting the product of variable cost per unit and lowest activity units from the lowest activity cost.

Detailed explanation-5: -The high-low method is used in classifying a mixed cost into its variable and fixed elements. A mixed cost has both selling and administrative cost elements. The fixed cost element of a mixed cost is the cost of having a service available. For planning purposes, mixed costs are generally grouped with fixed costs.