Which of the following formulas is used to calculate the variable rate in the high-low method?
A) Total Cost at High Point - (Fixed Rate × Output at High Point)
B) Total Cost at High Point - (Step Rate × Output at Low Point)
C) (High Point Cost - Low Point Cost) ÷ (High Point Output - Low Point Output)
D) (Absorption Point Cost - Margin Cost) ÷ (High Point Cost + Low Point Cost)

Question

Quizplus · Accepted Answer

The high-low method uses the formula (High Point Cost - Low Point Cost) ÷ (High Point Output - Low Point Output) to calculate the variable rate. This formula determines the change in cost per unit for each unit change in output, which is the variable rate. Option A is incorrect because it calculates the fixed rate instead of the variable rate. Option B is incorrect because it references a non-existent "Step Rate" and uses the output at the low point instead of the high point. Option D is incorrect because it references "Absorption Point Cost" and "Margin Cost," which are not relevant to the high-low method.

Which of the Following Formulas Is Used to Calculate the Variable