{"id":101,"date":"2021-11-16T10:54:00","date_gmt":"2021-11-16T10:54:00","guid":{"rendered":"https:\/\/www.thetrainingplace.org\/blog\/2021\/11\/16\/high-low-point-method\/"},"modified":"2024-11-22T10:05:50","modified_gmt":"2024-11-22T10:05:50","slug":"high-low-point-method","status":"publish","type":"post","link":"https:\/\/www.thetrainingplace.org\/blog\/2021\/11\/high-low-point-method\/","title":{"rendered":"High\/Low Point Method"},"content":{"rendered":"<p><b style=\"mso-bidi-font-weight: normal;\"><u><span style=\"color: #4472c4; font-size: 19.0pt;\">HIGH\/ LOW POINT METHOD<\/span><\/u><\/b><\/p>\n<p><b style=\"mso-bidi-font-weight: normal;\"><span style=\"font-family: 'Arial',sans-serif; font-size: 14.0pt;\">Splitting of semi-variable costs <\/span><\/b><\/p>\n<p><span style=\"font-family: 'Arial',sans-serif; font-size: 12.0pt;\">Included in semi-variable costs is an element of both fixed and variable costs. In cost accounting it is important to be able to split these costs and identify the variable costs separately from the fixed costs and this is achieved by using the \u2018<u>high\/low\u2019 method<\/u>. <\/span><\/p>\n<p><span style=\"font-family: 'Arial',sans-serif; font-size: 12.0pt;\">The idea behind the application of the high\/low method is that if we agree that fixed cost doesn\u2019t change based on the activity level, that is, as you produce more units, the fixed cost will remain the same. So, where the cost changes, as activity is changing; this will be as a result of the variable costs element.<\/span><\/p>\n<p><span style=\"font-family: 'Arial',sans-serif; font-size: 12.0pt; mso-bidi-font-weight: bold;\">The high\/low method of splitting semi-variable cost picks the total cost at two different activity levels and finds the additional cost incurred in making the additional units. The additional cost is then divided by the number of additional units made and this leads to the variable cost per unit, which is then used to calculate the total variable and fixed cost by applying the unit cost to the high or the low activity level.<\/span><\/p>\n<p><b style=\"mso-bidi-font-weight: normal;\"><span style=\"font-family: 'Arial',sans-serif; font-size: 12.0pt;\">Question:<\/span><\/b><\/p>\n<div style=\"clear: both; text-align: center;\"><b style=\"mso-bidi-font-weight: normal;\"><a style=\"margin-left: 1em; margin-right: 1em;\" href=\"https:\/\/blogger.googleusercontent.com\/img\/b\/R29vZ2xl\/AVvXsEilSopGXm2pL9zu8zGTiPVZUM3rfKVoJ_inqjlj3dmo88rRPlr4BznVcHY3ZxslCuAU28aJQsrGgH9eeT1U2s3G2L63luWX1Gz7GAR8rqY-wVpukS-Q1ZL0xY_1H8yHJqGcKEOHsQ3atAk\/s1833\/1.jpg\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/blogger.googleusercontent.com\/img\/b\/R29vZ2xl\/AVvXsEilSopGXm2pL9zu8zGTiPVZUM3rfKVoJ_inqjlj3dmo88rRPlr4BznVcHY3ZxslCuAU28aJQsrGgH9eeT1U2s3G2L63luWX1Gz7GAR8rqY-wVpukS-Q1ZL0xY_1H8yHJqGcKEOHsQ3atAk\/w661-h84\/1.jpg\" width=\"661\" height=\"84\" border=\"0\" data-original-height=\"236\" data-original-width=\"1833\" \/><\/a><\/b><\/div>\n<p><b><span style=\"font-family: 'Arial',sans-serif; font-size: 12.0pt;\">Solution:<\/span><\/b><\/p>\n<p><span style=\"font-family: 'Arial',sans-serif; font-size: 12.0pt;\">Additional cost = \u00a324715-16480 = \u00a38235<\/span><\/p>\n<p><span style=\"font-family: 'Arial',sans-serif; font-size: 12.0pt;\">Additional units= 3150-1800= 1350<\/span><\/p>\n<p><span style=\"font-family: 'Arial',sans-serif; font-size: 12.0pt;\">VC\/ unit= \u00a38235\/1350= \u00a36.10<\/span><\/p>\n<p><span style=\"font-family: 'Arial',sans-serif; font-size: 12.0pt;\">Total VC, using the low point= \u00a36.10&#215;1800= \u00a310980<\/span><\/p>\n<p><span style=\"font-family: 'Arial',sans-serif; font-size: 12.0pt;\">Total FC, using the low point = \u00a316480-10980= \u00a35500<\/span><\/p>\n<p><span style=\"font-family: 'Arial',sans-serif; font-size: 12.0pt;\">This will be applied to all the activity levels in the question:<\/span><\/p>\n<p><span style=\"font-family: 'Arial',sans-serif; font-size: 12.0pt;\">2100 units x \u00a36.10= \u00a312,810<\/span><\/p>\n<p><span style=\"font-family: 'Arial',sans-serif; font-size: 12.0pt;\">2600 units x \u00a36.10= \u00a315,860<\/span><\/p>\n<p><span style=\"font-family: 'Arial',sans-serif; font-size: 12.0pt;\">2900 units x \u00a36.10= \u00a317,690<\/span><\/p>\n<p>&nbsp;<\/p>\n<div style=\"clear: both; text-align: center;\"><b style=\"mso-bidi-font-weight: normal;\"><a style=\"margin-left: 1em; margin-right: 1em;\" href=\"https:\/\/blogger.googleusercontent.com\/img\/b\/R29vZ2xl\/AVvXsEgGiowXfP8AlP1SAZvQA7FHZJV7PbvHGZhxkY_KTi2K9OVoRv-5tXAWYCZ4m-8VWmLPSDXkKBY0z15OSAVCoTJvWjt4Fo_KeocPMyR7y3UjdhqiFrgjfrdC0AgbkDlmvA7xv573UJB5AMk\/s1903\/2.jpg\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/blogger.googleusercontent.com\/img\/b\/R29vZ2xl\/AVvXsEgGiowXfP8AlP1SAZvQA7FHZJV7PbvHGZhxkY_KTi2K9OVoRv-5tXAWYCZ4m-8VWmLPSDXkKBY0z15OSAVCoTJvWjt4Fo_KeocPMyR7y3UjdhqiFrgjfrdC0AgbkDlmvA7xv573UJB5AMk\/w649-h85\/2.jpg\" width=\"649\" height=\"85\" border=\"0\" data-original-height=\"251\" data-original-width=\"1903\" \/><\/a><\/b><\/div>\n<p><b style=\"mso-bidi-font-weight: normal;\">\u00a0<\/b><\/p>\n","protected":false},"excerpt":{"rendered":"<p>HIGH\/ LOW POINT METHOD Splitting of semi-variable costs Included in semi-variable costs is an element of both fixed and variable costs. In cost accounting it is important to be able to split these costs and identify the variable costs separately from the fixed costs and this is achieved by using the \u2018high\/low\u2019 method. The idea &#8230; <a class=\"read-more\" href=\"https:\/\/www.thetrainingplace.org\/blog\/2021\/11\/high-low-point-method\/\">Read More<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-101","post","type-post","status-publish","format-standard","hentry","category-uncategorised"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>High\/Low Point Method - The Training Place Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.thetrainingplace.org\/blog\/2021\/11\/high-low-point-method\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"High\/Low Point Method - The Training Place Blog\" \/>\n<meta property=\"og:description\" content=\"HIGH\/ LOW POINT METHOD Splitting of semi-variable costs Included in semi-variable costs is an element of both fixed and variable costs. 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