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فيديو شرح High Low Method for Estimating Variable and Fixed cost. Cost Accounting Course. CPA exam.CMA Exam ضمن كورس محاسبة التكاليف شرح قناة Farhat Lectures. The # 1 CPA & Accounting Courses، الفديو رقم 38 مجانى معتمد اونلاين
How does the high-low method separate fixed and variable costs? In this cost accounting lesson for CPA BAR and CMA candidates, Professor Farhat explains the high-low method step by step — selecting the highest and lowest activity levels, computing the variable cost per unit, solving for fixed cost, and building the linear cost equation. Ideal for cost and managerial accounting students learning cost behavior estimation.
Try it free at farhatlectures.com — interactive exercises, lectures, simulations, cases, multiple choice, and AI tools for CPA, CMA, EA and students.
Video Timeline & Key Concepts:
0:00 — Introduction
0:43 — Purpose of the high-low method
4:13 — Step 1: identify the high and low activity points
5:48 — Step 2: calculate the variable cost per unit
6:19 — Step 3: solve for fixed cost
9:00 — The linear cost equation
Frequently Asked Questions:
What is the high-low method?
The high-low method is a cost estimation technique that separates a mixed cost into its fixed and variable components using only the highest and lowest activity levels in a data set. It is a quick way to estimate cost behavior when detailed data is limited.
How do you calculate the variable cost per unit with the high-low method?
You divide the difference in total cost between the highest and lowest activity levels by the difference in activity between those two points. The result is the estimated variable cost per unit of activity.
How do you find fixed cost using the high-low method?
Once the variable cost per unit is known, substitute it back into the total cost equation at either the high or low point. Subtracting the estimated variable cost from total cost leaves the estimated fixed cost.
What is the cost equation used in the high-low method?
The method uses the linear equation where total cost equals fixed cost plus the variable cost per unit times the activity level. This is the same form as a straight line, with fixed cost as the intercept and the variable rate as the slope.
What are the limitations of the high-low method?
Because it relies on only two data points, the high-low method can be distorted if those points are not representative of the overall cost behavior. Methods like regression, which use all the data, often produce more accurate estimates.
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