High - low method of cost estimation, Cost Accounting

Assignment Help:

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.


Related Discussions:- High - low method of cost estimation

Determine profit by using absorption costing, Determine Profit by Using Abs...

Determine Profit by Using Absorption Costing Assuming the fixed overhead absorption rate was Ksh.3 per litre, then what would be the profit utilizing absorption costing? a)

Direct materials and direct labor:, McDaniel Company manufactures 100-pound...

McDaniel Company manufactures 100-pound bags of fertilizer that have the following unit standard costs for direct materials and direct labor: Direct Materials (100 lbs. @ $1.00

Cvp for multiple products, CVP for Multiple Products What number of bus...

CVP for Multiple Products What number of businesses sells only one manufactured goods? The reality is that firms usually give us the diverse product line, and the individual pr

Cost Accountng, a local government autority owns and operates a leisure cen...

a local government autority owns and operates a leisure center with numerous sporting facilities , residential accomodation , a cafeterial and a sports shop. the summer season last

What are total fixed cost, Corporation has determined the contribution marg...

Corporation has determined the contribution margin ratio is 35% and the income tax rate is 40%. Required: A) Assume break-even volume in dollars is $1,500,000. What are total fixed

Describe the concept of full cost recovery with illustrative, Describe the ...

Describe the concept of full cost recovery with illustrative examples.

Compute the manufacturing overhead, Slick Corporation is a small producer o...

Slick Corporation is a small producer of synthetic motor oil. During May, the company produced 5,000 cases of lubricant. Each case contains twelve quarts of synthetic oil. To achie

Accelerated cost recovery system - acrs, ACRS is a system of depreciation s...

ACRS is a system of depreciation started by the Economic Recovery Tax Act of 1981. ACRS depreciation relies on recovery periods in spite of useful life. These periods were preset b

Find the discount rate and wacc, 1. A company is considering a project that...

1. A company is considering a project that requires an initial investment of $100 million and will pay $20 million of each of the next 10 years, and nothing thereafter. The company

Cost data determination, Cost Data Determination How does one decide th...

Cost Data Determination How does one decide the cost data for products and the services which are the end result of the productive processes? The response to this question is m

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd