High-Low Method Calculator

Separate mixed costs into variable and fixed components using the High-Low Method

✓ Cost Analysis ✓ Variable Cost ✓ Fixed Cost

High-Low Method Calculator

High Activity Level

Highest activity level in the period
Total cost at highest activity level

Low Activity Level

Lowest activity level in the period
Total cost at lowest activity level

Analysis Options

About High-Low Method

The High-Low Method separates mixed costs into variable and fixed components using the highest and lowest activity levels.

Formula:

Variable Cost per Unit = (High Cost - Low Cost) ÷ (High Activity - Low Activity)
Fixed Cost = Total Cost - (Variable Cost per Unit × Activity Level)

Cost Behavior Types

Variable Costs: Change with activity
Fixed Costs: Remain constant
Mixed Costs: Both components
Step Costs: Change in steps

Quick Examples

Manufacturing Example
10,000 units: $75,000
5,000 units: $50,000
Utility Example
8,000 hours: $12,000
3,000 hours: $7,500

Method Limitations

Assumptions: Linear cost relationship
Data Points: Uses only two observations
Outliers: Sensitive to extreme values
Accuracy: Less precise than regression
Range: Valid within relevant range

Applications

Budgeting: Cost planning and forecasting
Pricing: Product cost determination
Analysis: Break-even analysis
Control: Cost variance analysis
Decisions: Make-or-buy decisions
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How to Use

  1. Enter the highest activity level and its corresponding total cost
  2. Enter the lowest activity level and its corresponding total cost
  3. Select the type of cost and activity unit being analyzed
  4. Calculate to see variable cost per unit and fixed cost
  5. Review the cost equation and behavior analysis
  6. Use results for budgeting and cost planning

Understanding the Method

Variable Cost Component

Changes proportionally with activity level. Calculated as the slope of the cost line.

Fixed Cost Component

Remains constant regardless of activity level. The y-intercept of the cost equation.

Cost Equation

Total Cost = Fixed Cost + (Variable Cost per Unit × Activity Level)