   Chapter 21, Problem 4DQ

Chapter
Section
Textbook Problem

In applying the high-low method of cost estimation to mixed costs, how is the total fixed cost estimated?

To determine

High-low method: It is the method of estimating the variable cost per unit and the fixed costs by using the highest and the lowest level of activities and their associated costs.

To explain: the estimation of the total fixed cost.

Explanation

Mixed costs refer to the cost that possesses the features of both variable cost and fixed cost. It also known as semi variable or semi fixed cost. The estimation of the total fixed cost from the mixed cost is explained in the following steps:

Step 1: The change in the total variable cost is the difference in the total cost associated to the lowest level of activity and the total cost associated to the highest level of activity...

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