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Video of High Low Method Normal and Abnormal Spoilage Cost Accounting CPA Exam CMA Exam in Costs Accounting course by Farhat Lectures. The # 1 CPA & Accounting Courses channel, video No. 22 free certified online
How does the high-low method work and how do you account for normal and abnormal spoilage? In this cost and managerial accounting lecture, Professor Farhat works through practical CPA and CMA exam problems on variable cost estimation, total cost projection, the high-low method, and the difference between normal and abnormal spoilage. CPA and CMA candidates and accounting students will find this essential BAR exam material.
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
0:16 — Variable cost estimation per unit
1:26 — Total cost projection when production and sales differ
3:25 — The high-low method
5:11 — Normal vs. abnormal spoilage
6:03 — Applying spoilage to input quantities
Frequently Asked Questions:
How do you estimate variable cost per unit?
You identify the variable components, such as direct materials, direct labor, variable overhead, and variable selling expenses, and combine them to calculate the total variable cost per unit.
What is the high-low method?
The high-low method estimates variable and fixed costs by comparing the difference in total costs and activity levels between the highest and lowest activity data points.
What is the difference between normal and abnormal spoilage?
Normal spoilage is expected under efficient operations and is treated as a product cost, while abnormal spoilage exceeds normal levels and is expensed as a loss in the period incurred.
How does spoilage affect input quantities?
When a portion of input is lost during production, the input quantity must be adjusted upward so that enough units are started to yield the required good output.
Is this tested on the CPA exam?
Yes. Cost behavior, the high-low method, and spoilage are tested in the BAR section and on the CMA exam.
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