High-Low Method Calculator 2026
Separate Fixed & Variable Costs Using the High-Low Method
Based on AICPA accounting standards
What is the High-Low Method?
๐ High-Low Method Explained
The High-Low Method is a cost accounting technique used to separate fixed costs and variable costs from mixed (semi-variable) costs. It uses only two data pointsโthe highest and lowest activity levelsโto estimate the variable cost per unit and total fixed costs.
This method is simple and quick but has limitations: it only uses two data points, which may not be representative of the entire range of activity. For more accurate analysis, regression analysis or the least-squares method may be preferred.
High-Low Method Calculator
Enter Highest & Lowest Activity Data
๐ Highest Activity Point
๐ Lowest Activity Point
๐ฏ Estimate Cost at Any Activity Level
๐ Cost Analysis Results
๐ Step-by-Step Calculation
The High-Low Method Formula
Step 1: Calculate Variable Cost Per Unit
Step 2: Calculate Fixed Costs
Step 3: Cost Equation (Mixed Cost Formula)
- Identify High & Low Points: Find periods with highest and lowest activity levels (units, hours, etc.).
- Calculate Change in Cost: Subtract low cost from high cost (ฮCost = High Cost โ Low Cost).
- Calculate Change in Activity: Subtract low activity from high activity (ฮActivity = High โ Low).
- Calculate Variable Cost: Divide change in cost by change in activity (VC = ฮCost รท ฮActivity).
- Calculate Fixed Costs: Use either point: FC = Total Cost โ (Variable Cost ร Activity).
Worked Example: High-Low Method
๐ Example: Manufacturing Company
A company has the following production data:
| Month | Units Produced | Total Cost |
|---|---|---|
| January | 4,000 | $45,000 |
| February | 6,000 | $55,000 |
| March | 5,000 | $50,000 |
| April (Low) | 3,000 | $40,000 |
| May (High) | 8,000 | $65,000 |
| June | 7,000 | $60,000 |
Step 1: Variable Cost = ($65,000 โ $40,000) รท (8,000 โ 3,000) = $25,000 รท 5,000 = $5 per unit
Step 2: Fixed Costs = $65,000 โ ($5 ร 8,000) = $65,000 โ $40,000 = $25,000
Cost Equation: Total Cost = $25,000 + ($5 ร Units)
High-Low Method vs Other Cost Estimation Methods
| Method | Data Points Used | Accuracy | Complexity | Best For |
|---|---|---|---|---|
| High-Low Method | 2 (highest & lowest) | Low-Medium | Simple | Quick estimates, teaching |
| Scatter Plot | All available | Medium | Simple | Visual analysis |
| Regression Analysis | All available | High | Complex | Precise estimation |
| Account Analysis | N/A (judgment) | Varies | Medium | When data is limited |
| Engineering Estimates | N/A (standards) | High | Complex | New products |
Advantages & Limitations
โ Advantages
- Simple and easy to calculate
- Requires minimal data (only 2 points)
- Quick for rough estimates
- Good for teaching cost concepts
- Useful when limited data available
โ ๏ธ Limitations
- Uses only 2 data points (ignores others)
- Sensitive to outliers
- Assumes linear cost behavior
- May not be accurate for predictions
- Doesn't indicate reliability/Rยฒ
Official Resources
Frequently Asked Questions
The high-low method is a cost estimation technique that separates fixed and variable costs from mixed costs using only two data points: the periods with the highest and lowest activity levels. It calculates variable cost per unit and total fixed costs.
Variable Cost per Unit = (High Cost โ Low Cost) รท (High Activity โ Low Activity). This formula calculates the slope of the cost line, representing how much cost changes per unit of activity.
Fixed Costs = Total Cost โ (Variable Cost ร Activity). Use either the high or low point: FC = High Cost โ (VC ร High Activity), or FC = Low Cost โ (VC ร Low Activity). Both should give the same result.
Use it for: quick rough estimates, when limited data is available, teaching/learning cost concepts, or preliminary analysis. For important decisions, use regression analysis for more accurate results.
Mixed costs (semi-variable costs) have both fixed and variable components. Examples: utility bills (fixed base + variable usage), phone plans (fixed fee + per-minute charges), salesperson salaries (base + commission).
It only uses 2 data points while ignoring all other observations. The high and low points may be outliers not representative of normal operations. Regression analysis uses all data points and provides accuracy measures (Rยฒ).
They should be identical if calculated correctly. If slightly different (due to rounding), average them. If significantly different, check for calculation errors or outlier periods that may not represent normal cost behavior.
No, variable cost per unit should be positive. A negative result indicates an error: either the high/low points are identified incorrectly, the data contains errors, or the cost doesn't follow the expected pattern.
The relevant range is the activity level range where the cost behavior (fixed vs variable) holds true. Outside this range, costs may behave differently. High-low estimates only apply within the relevant range.
Regression uses ALL data points and provides Rยฒ (goodness of fit). High-low only uses 2 points. Regression is more accurate but complex. Use high-low for quick estimates; regression for important decisions.
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Last Updated: January 2026