Page 16 - PowerPoint Presentation
P. 16
RECAP
High-low Method
• Always remember that a high-low scenario is only
applicable where there are different costs for two
different levels of activity, during a specified time period.
• You CAN’T compare a budgeted and actual activity and do
a high-low method application based on that.
• The high-low method is based on two levels of budgeted
activity or two levels of actual activity.
• If you notice an inconsistent increase/reduction in total
costs relative to a specific activity, (non-linearity,) ignore
that activity level in your consideration of the high and
low points.
• It is important that you review all the data points, before
deciding on the high and low levels.
16
