The high-low method is used in cost accounting to estimate fixed and variable costs based on a business's highest and lowest levels of activity. By focusing on these extremes, the high-low method ...

So, the dealership can estimate the variable costs for the $400,000 month to be $333,333 (based on 100 cars multiplied by the $3,333.33 variable cost per unit) and the fixed costs to be $66,667.

Another advantage of this method is that it only requires two sets of numbers to calculate the fixed and variable costs. These include the activity level and the total cost. The accountant reviews ...

Companies with high fixed costs must earn a substantial amount of revenue to cover these costs and remain in business. For this type of company, it helps to have a low variable cost ratio.

Operating leverage is a cost-accounting formula that measures the degree to which a firm can increase operating income by increasing revenue.

The high-low method is used in cost accounting to estimate fixed and variable costs based on a business's highest and lowest levels of activity. By focusing on these extremes, the high-low method ...