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High-Low Method Cost Analysis Tutorial

This document provides three tutorial questions that can be solved using the high-low method. The high-low method is a technique used to separate fixed and variable costs. It involves identifying the highest and lowest total costs and volumes within a given period, then using the difference between total costs and volumes to calculate the variable cost per unit and fixed cost. The document presents cost and production data and asks the reader to use the high-low method to analyze the data and calculate various costs based on the information provided. It also asks the reader to state examples of fixed and variable costs and discuss one advantage and one disadvantage of the high-low method.

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Jared Johnson
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222 views2 pages

High-Low Method Cost Analysis Tutorial

This document provides three tutorial questions that can be solved using the high-low method. The high-low method is a technique used to separate fixed and variable costs. It involves identifying the highest and lowest total costs and volumes within a given period, then using the difference between total costs and volumes to calculate the variable cost per unit and fixed cost. The document presents cost and production data and asks the reader to use the high-low method to analyze the data and calculate various costs based on the information provided. It also asks the reader to state examples of fixed and variable costs and discuss one advantage and one disadvantage of the high-low method.

Uploaded by

Jared Johnson
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
  • Question 1
  • Question 3
  • Question 2

TUTORIAL: HIGH LOW METHOD

QUESTION 1

Hogwart & Co is a successful business that deals with electrical goods. Salaries to employees
are paid based on the fixed amount plus the number of goods managed to be done. Below are
the 12 months cost on direct employees.

Month Units Cost (RM)


January 215 15,400
February 192 22,200
March 250 24,300
April 135 13,300
May 200 18,500
June 195 25,400
July 190 25,000
August 300 28,000
September 275 28,000
October 200 18,000
November 200 23,000
December 100 12,000

Required:

a) Calculate the variable cost per unit and the amount of fixed cost using high-low method.
(4 marks)

b) Calculate total cost to be incurred in the first month of next year if they managed to produce
350 units.
(2 marks)

c) List TWO (2) examples of fixed costs and TWO (2) examples of variable costs.
(4 marks)
QUESTION 2

Sinar Berhad has measured production volumes and costs over five days. Results are:

Day Volume Cost


(RM)
Monday 2,000 5,300
Tuesday 3,000 7,000
Wednesday 4,000 9,000
Thursday 2,000 5,400
Friday 1,000 3,000

Required:

i. Use the high-low method to calculate the variable cost per unit and the fixed costs
per month.
(6 Marks)

ii. Explain ONE (1) advantage and ONE (1) disadvantage of the high-low method.

(4 Marks)

QUESTION 3

Advertising and selling costs for the second half of the year 2016 are as follows:

Month Units produced Cost


July 10,200 RM50,450
August 13,550 RM58,800
September 16,020 RM70,990
October 32,000 RM80,250
November 10,000 RM25,500
December 40,000 RM85,500

Required:

i. Use the high-low method to calculate the variable cost per unit and the fixed costs
per month.
(6 Marks)
ii. Explain ONE (1) advantage and ONE (1) disadvantage of the high-low method.
(4 Marks)

TUTORIAL: HIGH LOW METHOD QUESTION 1 Hogwart & Co is a successful business that deals with electrical goods. Salaries
QUESTION 2 Sinar Berhad has measured production volumes and costs over five days. Results are: Day Volume Cost (RM)

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