The high-low method can be used to determine a cost function for mixed costs.

Question

Quizplus · Accepted Answer

The high-low method is a technique used to separate mixed costs into their variable and fixed components. By identifying the highest and lowest activity levels and the associated costs, it is possible to calculate the variable cost per unit of activity and the fixed cost component. Once these are determined, a cost function can be developed to estimate total cost at any level of activity within the relevant range.

The High-Low Method Can Be Used to Determine a Cost