High-low method

High-low method separates a mixed cost into fixed and variable components using only two observations: the period with the highest activity and the period with the lowest.

Also known ashigh low

ByHoang TruongUpdated June 30, 2026

See it move

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A scatter chart plots cost in euros against activity measured in dispatches, with a straight line drawn through only the two extreme data points: the high point at 4,000 dispatches costing €2,600 and the low point at 1,000 dispatches costing €1,100. The slope — (€2,600 − €1,100) ÷ (4,000 − 1,000) — gives a variable rate of €0.50 per dispatch, and the y-intercept of €600 represents the fixed component. All observations between the two extremes are ignored by the method.

Where it fits

SubjectCost AccountingAdvancedTopicCost Behaviour & EstimationAdvanced

The formula

LaTeX

\text{Variable rate} = \frac{\text{Cost at highest activity} - \text{Cost at lowest activity}}{\text{Highest activity} - \text{Lowest activity}}

Variables

$V a r iab l er a t e$: Estimated variable cost per unit of activity (€ per unit of activity)

LaTeX

\text{Fixed cost} = \text{Total cost at either point} - (\text{Variable rate} \times \text{Activity at that point})

Variables

$F i x e d cos t$: Constant cost component, unchanged within the relevant range (€)

LaTeX

\text{Total cost} = \text{Fixed cost} + (\text{Variable rate} \times \text{Activity level})

Variables

$A c t i v i t y l e v e l$: Volume of activity (e.g. units, machine-hours, dispatches) (units)

The estimated mixed-cost function derived from the two data points.

Check yourself

PracticeCORE

A service centre records the following monthly data: September (the busiest month) had 1,800 service calls and total costs of €14,400; February (the quietest month) had 600 service calls and total costs of €6,000. Using the high-low method, what is the estimated monthly fixed cost?

Select an answer to check your understanding.