Put the following steps in order for using the high-low method of estimating a cost function:

A)D C A B
B)C D A B
C)A D C B
D)D C B A

Question

Put the following steps in order for using the high-low method of estimating a cost function:

A)D C A B 
B)C D A B 
C)A D C B 
D)D C B A

Quizplus · Accepted Answer

The correct order for using the high-low method is:

1. Determine the highest and lowest levels of activity and their corresponding costs.
2. Calculate the variable cost per unit by dividing the difference in costs between the high and low activity levels by the difference in activity levels.
3. Calculate the fixed cost element of the cost function by subtracting the variable cost per unit from the total cost at either the high or low activity level.
4. Write the cost function using the formula: Total Cost = Fixed Cost + (Variable Cost per Unit x Activity Level)

Therefore, the correct order is A D C B.

Put the Following Steps in Order for Using the High-Low