In using the high-low method the fixed cost
A) is determined by subtracting the total cost at the high level of activity from the total cost at the low activity level.
B) is determined by adding the total variable cost to the total cost at the low activity level.
C) is determined before the total variable cost.
D) may be determined by subtracting the total variable cost from either the total cost at the low or high activity level.

Question

Quizplus · Accepted Answer

The fixed cost can be determined by subtracting the total variable cost from either the total cost at the low or high activity level, as this allows for the separation of the fixed and variable components of the cost. Option A is incorrect as it only calculates the difference between the two total costs, without considering the variable component. Option B is incorrect as it adds the total variable cost to the low activity level, which does not provide useful information about the fixed cost. Option C is also incorrect as the fixed cost must be determined before the total variable cost in order to separate the two components.

In Using the High-Low Method the Fixed Cost