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High-Low Method

[HAI-LOH meth-uhd]

What is the definition of High-Low Method?
A technique used in cost accounting to separate fixed and variable costs associated with a business activity by analyzing the highest and lowest points of activity and their corresponding costs.
Using High-Low Method in an Example

In a manufacturing company, the high-low method is used to estimate the variable and fixed components of its production costs. By examining the cost at the highest level of production (200 units costing $5000) and the lowest level of production (100 units costing $3500), the company can determine the variable cost per unit and the total fixed cost.

Using High-Low Method in a sentence

Our finance team applied the high-low method to better understand how our production costs change with varying levels of output.

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