Page 194 - Microsoft Word - 00 ACCA F2 Prelims.docx

Chapter 12

The high-low method (re-cap)

2.1 Step by step process

This is a method of breaking semi-variable costs into their two components.

A semi-variable cost being a cost which is partly fixed and partly variable.

Step 1

Find the variable cost per unit

Change in cost
=
Change in activity

Step 2

Find the fixed cost

= Total cost – (variable cost per unit × activity level)

Step 3

Calculate the expected cost

Total cost = Total fixed cost + (Variable cost per unit × activity level)

188