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.

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.

Dividing $1,000 by 250 equals $4, which according to the high-low method is the average cost of manufacturing one shirt. This is only the variable portion of the cost structure.

If a total of 10,000 ink pens are manufactured using the machine at a variable cost of $6,000 and at a fixed cost of $10,000, the total manufacturing cost comes to $16,000.

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 ...