A technique used to determine the variable rate (slope of a total cost line) of an independent variable and the fixed amount by using just two points: the highest point and the lowest point. For example, if at the highest volume of processing items there were 10,000 items processed at a total cost of $35,000 and at the lowest volume there were 6,000 items processed at a total cost of $27,000, the high-low method indicates the variable rate was $2 per unit. ($35,000 – $27,000) divided by (10,000 – 6,000). The fixed amount will be $15,000 [$27,000 – $2(6,000)].
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For the past 52 years, Harold Averkamp (CPA, MBA) has
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