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High-Low Method

Calculate variable and fixed costs using high-low method.

High-Low Method Calculator

High Activity Point

Activity Level (Units)

Total Cost ($)

Low Activity Point

Activity Level (Units)

Total Cost ($)

Results

Variable Cost per Unit

Fixed Cost

Cost Function

Cost Breakdown at Different Activity Levels

Activity Level	Fixed Cost	Variable Cost	Total Cost

Validation Check

High Point Validation:

$ + ( × $) = $

Low Point Validation:

$ + ( × $) = $

Formula

Variable Cost per Unit =

(High Cost - Low Cost) ÷ (High Activity - Low Activity)

Fixed Cost =

High Cost - (High Activity × Variable Cost per Unit)

Cost Function: Total Cost = Fixed Cost + (Variable Cost per Unit × Activity Level)

Example

Scenario: Manufacturing company analyzing electricity costs

High activity: 10,000 units produced, total cost $45,000
Low activity: 5,000 units produced, total cost $30,000

Variable Cost per Unit:

($45,000 - $30,000) ÷ (10,000 - 5,000) = $3.00

Fixed Cost:

$45,000 - (10,000 × $3.00) = $15,000

Cost Function: Total Cost = $15,000 + ($3.00 × Units)

Usage Tips & Limitations

Best Practices

Use data points from normal operating conditions
Ensure significant difference between high and low activity levels
Verify that cost behavior is linear in the relevant range
Consider seasonal variations and outliers

Limitations

Assumes linear cost behavior
Uses only two data points (may not be representative)
Doesn't account for step costs or mixed cost behaviors
Results are only as good as the data points selected