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Analysing semi variable costs using the high-low method

Forums › FIA Forums › MA2 Managing Costs and Finance Forums › Analysing semi variable costs using the high-low method

  • This topic has 3 replies, 3 voices, and was last updated 11 years ago by rajkumar kerry.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • October 7, 2013 at 12:46 am #142191
    rajkumar kerry
    Member
    • Topics: 3
    • Replies: 1
    • ☆

    Hi i’m new to this page. I’m studying MA2 & using the open tuition course notes i was reading the semi variable cost using the high low method and i don’t understand it at all. I don’t have the bpp textbook as yet for additional info. Please help me. Thank you.

    October 7, 2013 at 5:01 am #142194
    nokia
    Member
    • Topics: 1
    • Replies: 63
    • ☆☆

    High low method is used to separate variable cost and fixed cost from semi-variable/semi-fixed cost(means the cost contains fixed as well as variable cost)

    in this method we take the highest and lowest activity level to process our calculation (remember highest and lowest activity level not cost)

    Assuming this is the highest and lowest activity level

    Units/hours/Activity level : 10 , Cost 150
    Units/hours/Activity level : 15, , Cost 200

    This cost is semi-variable cost.. It contains fixed(which is same in both activity levels) as well as variable cost. The difference in cost i.e 50 represents variable cost only because fixed cost is same in both.. Total variable cost will be different at different activity levels…. this 50 is due to the difference in no. of units. the difference in no of units is 5.

    Now we have difference in cost (which is totally variable) and difference in units we can now compute per unit variable cost
    50 / 5 = 10 per unit.

    Now we can calculate fixed cost using any of the two activities by first calculating the total variable cost and then subtracting it from the total cost….

    October 7, 2013 at 5:48 am #142196
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You can find a lecture on this on the ACCA F2/FMA page of this website that may help you. The lecture is called ‘cost classification part b’.

    October 7, 2013 at 10:53 pm #142232
    rajkumar kerry
    Member
    • Topics: 3
    • Replies: 1
    • ☆

    Thak you so much guys it help 🙂

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