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Quantitative analysis





                           High-low analysis







                             The high-low method of analysing a semi-variable cost into its fixed
                             and variable elements based on an analysis of historical information
                             about costs at different activity levels.

                             The fixed and variable costs can then be used to forecast the total
                             cost at any level of activity.


               1.1  Steps


                  1          Select the highest and lowest activity levels, and their costs


                             Find the variable cost/unit
                  2

                             Variable cost/unit =   Cost at high level of activity – Cost at low level activity
                                                           High level activity – Low level activity


                             Find the fixed cost, using either the high or low activity level
                  3
                             Fixed cost = Total cost at activity level – Total variable cost


                  4          Use the variable and fixed cost to forecast the total cost for a
                             specified level of activity

























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