Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › High-low method
- This topic has 1 reply, 2 voices, and was last updated 7 years ago by John Moffat.
- February 22, 2016 at 7:25 am #301522TheingiMember
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A company, which manufactures a range of products, has decided to introduce a product costing system. As a first step it wishes to analyse the behaviour of its costs.
The following data is available for the previous four periods.
A B C D E
Period 1 Period 2 Period 3 Period 4
1 Total costs ($) 214,559 239,970 243,183 259,541
2 Total output 62,500 79,350 86,170 85,620
Using the high-low method, which ONE of the following formulae will correctly calculate the cost of the variable element per unit?
A. = E2-B2/E3-B3
I answered B, the correct answer is C. I use the output for high and low activity but the correct answer use high and low for total cost. Please explain the correct way of calculation for the question.
Thanks in advance for your explanation.February 22, 2016 at 7:40 pm #301589John MoffatKeymaster
- Topics: 56
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Assuming that you have typed all the figures correctly, then the correct answer is indeed B 🙂
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