High-Low Method Calculator
Enter the cost and units at the highest and lowest activity levels to split a mixed cost into fixed and variable parts.
Updated
High-Low Method Calculator
Our High-Low Method Calculator separates a mixed cost into its fixed and variable parts from just two data points: the periods with the highest and the lowest activity. Enter the total cost and the units for each, plus a number of units you want a cost estimate for. It helps managers, accountants, business owners and students understand how a cost behaves and budget for other activity levels.
Quick answer
Variable cost per unit is (high cost − low cost) ÷ (high units − low units): (16,000 − 4,000) ÷ (1,000 − 200) = 15.
- Fixed cost: high cost − variable cost per unit × high units, here 16,000 − 15 × 1,000 = 1,000.
- Total cost: fixed cost + variable cost per unit × units.
- Two points only: the periods with the highest and lowest activity, not the highest and lowest cost.
- An estimate: it is quick, but less precise than regression on all the data.
What Is the High-Low Method?
The high-low method is a cost accounting technique for splitting a mixed cost into a fixed part and a variable part. It takes the period with the highest activity and the period with the lowest activity, and assumes the cost moves in a straight line between them.
- Variable cost is the part that rises with every extra unit made, sold or delivered.
- Fixed cost is the part that stays the same whatever the activity, such as rent or salaries.
Once you know both, you can estimate the total cost at any other activity level.
High-Low Method Formula
= (High cost − Low cost)
÷ (High units − Low units)
= High cost
− Variable cost × High units
= Fixed cost
+ Variable cost × Units
The fixed cost can also be found from the low point (low cost − variable cost × low units). Both give the same answer, because the line passes through both points.
How to Use the High-Low Method
A furniture workshop spent 4,000 in the month it made 200 tables and 16,000 in the month it made 1,000 tables. What will 700 tables cost?
= (16,000 − 4,000)
÷ (1,000 − 200)
= 12,000 ÷ 800
= 15
Fixed cost
= 16,000 − 15 × 1,000
= 1,000
Total cost for 700 tables
= 1,000 + 15 × 700
= 11,500
- Pick the two periods. Choose the highest and the lowest activity, with the total cost of each.
- Find the variable cost per unit. Divide the change in cost by the change in units: 12,000 ÷ 800 = 15.
- Find the fixed cost. Take the variable part out of either point: 16,000 − 15,000 = 1,000.
- Estimate another level. Add the fixed cost to the variable cost of the units you plan: 1,000 + 10,500 = 11,500.
High-Low Method Examples
| High and low points | Result |
|---|---|
| 1,000 tables for 16,000 200 tables for 4,000 | 15 per table Fixed 1,000 |
| 12,000 units for 150,000 6,000 units for 90,000 | 10 per unit Fixed 30,000 |
| 12,000 deliveries for 15,000 500 deliveries for 900 | ≈ 1.23 per delivery Fixed ≈ 286.96 |
The third case is a delivery business with costs for fuel, maintenance and salaries. Its variable cost is 14,100 ÷ 11,500 ≈ 1.2261 per delivery, and the fixed cost is 15,000 − 1.2261 × 12,000 ≈ 286.96. For 10,000 deliveries the estimate is 286.96 + 1.2261 × 10,000 ≈ 12,547.83. Keep the unrounded variable cost while you work: rounding it to 1.23 first would shift the fixed cost to 240.
Advantages and Limitations
| Strengths | Limits |
|---|---|
| Needs only two data points. | Ignores every period in between. |
| Quick to work out by hand. | The extremes are often unusual periods. |
| A simple base for break-even and budget work. | Assumes cost moves in a straight line. |
Because it relies on the two most extreme periods, a strike, a seasonal peak or a one-off repair can distort the result. When you have all the monthly figures, a scatter plot or least-squares regression uses every point and is usually more reliable. The high-low method is best as a fast first estimate.
When to Use the High-Low Method
- Limited history. You only have a few periods of cost data.
- Quick predictions. A feasibility check or a first budget draft.
- No statistics tools. Regression software is not available or not worth the effort.
- Small businesses and startups. Simple budgeting without an accounting team.
- Before expanding. A rough cost for a higher production or service level.
The fixed and variable costs it gives feed straight into break-even, contribution margin and cost-volume-profit calculations.
Common Mistakes
- Picking the highest and lowest cost. Choose the periods by activity. The cost comes with them.
- Mismatched pairs. Each cost must belong to the same period as its units.
- Rounding too early. Use the full variable cost when working out the fixed cost.
- Estimating far outside the range. The line is only tested between the low and high points.
- Using an abnormal period. Leave out months with shutdowns or one-off costs.
Key Terms
- Mixed cost
- A cost with both a fixed and a variable part, such as a utility bill with a standing charge.
- Variable cost
- The cost added by each extra unit of activity.
- Fixed cost
- The cost that stays the same across the activity range.
- Activity level
- The cost driver: units made, hours worked, deliveries or miles.
- Cost equation
- Total cost = fixed cost + variable cost per unit × units.
- Relevant range
- The span of activity over which the equation is expected to hold.
How to Use the High-Low Method Calculator
- Enter the high point. Type the total cost and the units for the period with the highest activity, such as 16,000 and 1,000.
- Enter the low point. Type the total cost and the units for the period with the lowest activity, such as 4,000 and 200.
- Enter the units to estimate. Type the activity level you want a total cost for, such as 700. Commas are fine.
- Read and copy the result. The variable cost per unit appears as you type, with the working, the fixed cost, the total cost and the cost equation. Press Copy to copy it, or Clear or Esc to start again.
Example: 150,000 for 12,000 units and 90,000 for 6,000 units, estimating 10,000 units. The variable cost is 10 per unit, the fixed cost is 30,000 and the total cost is 130,000.
Who Can Use This Calculator?
Frequently Asked Questions (FAQs)
How do you calculate the high-low method?
Subtract the low cost from the high cost and divide by the difference in units to get the variable cost per unit. Then fixed cost = high cost − variable cost per unit × high units, and total cost = fixed cost + variable cost per unit × units.
What is the variable cost if 1,000 units cost 16,000 and 200 units cost 4,000?
It is 15 per unit: (16,000 − 4,000) ÷ (1,000 − 200) = 12,000 ÷ 800 = 15. The fixed cost is 16,000 − 15 × 1,000 = 1,000.
What is the high-low method used for in cost accounting?
It separates a mixed cost into fixed and variable parts using only the highest and lowest activity levels. Managers and accountants use it to predict costs at other volumes when detailed data is missing or a quick estimate is enough.
Why is the high-low method considered simple?
It needs only two data points and basic arithmetic. Regression and scatter plot methods use every period and need statistical tools.
How accurate is the high-low method?
It is less accurate than least-squares regression because it uses two extreme points and ignores the rest. If either period was unusual, the estimate will be off. Treat it as a first estimate.
Do I choose the highest cost or the highest activity?
The highest and lowest activity. Activity drives the cost, so pick the periods with the most and the fewest units and use the costs recorded in those periods.
Can service businesses use the high-low method?
Yes. Any activity measure works: a delivery company can use deliveries or miles, and a consulting firm can use billable hours.
How do I read the results?
The variable cost per unit is how much the total cost rises with each extra unit. The fixed cost is the part that does not change with activity. The total cost is the fixed cost plus the variable cost for the units you entered.
Is the High-Low Method Calculator free?
Yes. It is completely free, needs no sign-up, and can be used as many times as you like.
Sources
- OpenStax. Principles of Accounting, Volume 2: Estimate a variable and fixed cost equation and predict future costs.
- AccountingCoach. What is the high-low method?.
- Corporate Finance Institute. High-low method.
Try our High-Low Method Calculator to split your costs into fixed and variable parts in seconds.