High - low method of cost estimation, Cost Accounting

High - Low Method of Cost Estimation

Now, cost estimation is based upon the relationship between past level and past cost of activity. Variable cost is based on the relationship between costs at the lowest level of activity and the highest level of activity. The difference in cost among low and high activity level is considered to be the net variable cost from that the unit variable cost can be computed by dividing it with the change in output level. This is shown underneath as:

 "Total Variable Cost = Cost at high activity level - Cost at low activity level"

Hence,

Unit Variable cost = Variable cost/ Output Units

= (Cost at high level activity - cost at low level activity)/ (Units at high activity level - units at low activity level)

The variable cost per unit so estimated forms the 'b' of the straight line equation stated earlier.  Via substituting 'b' into the equation, we can acquire 'a', the fixed cost.

Posted Date: 2/5/2013 3:59:58 AM | Location : United States







Related Discussions:- High - low method of cost estimation, Assignment Help, Ask Question on High - low method of cost estimation, Get Answer, Expert's Help, High - low method of cost estimation Discussions

Write discussion on High - low method of cost estimation
Your posts are moderated
Related Questions
1.    Provide at least three characteristics of a corporation (in your own words).   2.   The date on which a cash dividend becomes a binding legal obligation is known

process costing new practices

(a) Calculate Mexico's producer surplus and consumer surplus in autarky. (b) Calculate the number of Mexican imports with as well as without the Tarriff. (c) Calculate Mexico


Phelps Glass Inc. has reported the following financial data: net revenues of $10 million, variable costs of $5 million, controllable, fixed costs of $2 million, non-controllable fi

Q. Show the Break-even charts? Refers graphically profit and losses at different levels of sales volume achieved. When sales revenue is greater than total cost it m

Are non-profit and governments required to depreciate assets? Why or why not? Would it make sense for them to use double declining balance? Is there a difference between a non-p


Capital We have seen previous in this section that the fundamental accounting equality states as: Assets = liabilities + owners equity. From the illustration of balanc

What is labor costing,what are the problems involved in labor costing