When applying the high-low method the variable cost element of a mixed cost is calculated before the fixed cost element.

Question

Quizplus · Accepted Answer

The high-low method involves using the highest and lowest levels of activity to determine the variable cost per unit of activity. This variable cost per unit is then used with one of the activity levels (either the highest or the lowest) to calculate the total variable cost. Once the total variable cost is known, it can be subtracted from the total mixed cost at either the highest or the lowest level of activity to determine the fixed cost element. Therefore, the variable cost element is calculated before the fixed cost element.

When Applying the High-Low Method the Variable Cost Element of a Mixed