When using the high-low method, the "high" point should be chosen as the data point with the highest volume (not the highest cost).

Question

Quizplus · Accepted Answer

The high point in the high-low method should be based on the highest volume, as it represents the peak level of activity during the period being analyzed. This helps to ensure that the variable cost rate is calculated accurately, since it is based on the change in total costs divided by the change in volume between the high and low points. Choosing the highest cost point instead could result in an inaccurate or distorted variable cost rate, leading to errors in future forecasting and decision making.

When Using the High-Low Method, the "High" Point Should Be