Page 176 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

Chapter 10

The high-low method

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

Increase in cost
=
Increase in activity

Step 2 Find the fixed cost

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

Step 3 Calculate the expected cost

172