ACCA PM · Guided practice (Show me how)
Chapter 12: Analytical techniques in budgeting and forecasting
High-low - split a semi-variable cost and use it
The following table shows the number of units produced each month and the total cost incurred:
| Units | Cost ($) | |
|---|---|---|
| January | 100 | 40,000 |
| February | 400 | 65,000 |
| March | 200 | 45,000 |
| April | 700 | 85,000 |
| May | 600 | 70,000 |
| June | 500 | 70,000 |
| July | 300 | 50,000 |
Estimate the variable cost per unit, and the fixed cost per month, using the high-low method.
(a) Variable cost per unit
Calculate the differences in activity and total cost and estimate the company's variable cost per unit from the January to July observations.
(b) Fixed cost per month
Calculate the variable cost at the relevant activity level and estimate the company's fixed cost per month from the January to July observations.
Opening this exercise…