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# High-Low Points Method and the High/Low Method

1. High-Low Points Method

BEYONDBIKES.COM considers electricity a mixed cost. By using a scatter chart, George has determined that there is a relationship between electricity expense and the number of hours per month the store is open. During the past year, electricity expense totaled \$7200 in the month that the store was open 1200 hours and \$4200 in the month that it was open 300 hours. What fixed monthly cost and hourly rate should George use to estimate electricity expense for the upcoming year?

2. High/Low Method

BEYONDBIKES.COM frequently hires temporary secretarial help and also pays overtime wages to its full-time secretaries. Management believes that the need for additional secretarial help is based on either total sales or the number of employee hours worked. I have already determined this by preparing a Scatter Graph and it is TOTAL SALES! Data from last yearÃ¢??s records are shown below:

Month Total Total Total
Secretarial Sales Number
Expense of Employee
Hours

January \$13,000 \$90,000 20,000
February \$14,000 \$100,000 10,000
March \$14,000 \$110,000 25,000
April \$16,000 \$160,000 30,000
May \$12,000 \$80,000 14,000
June \$17,000 \$180,000 28,000
July \$20,000 \$240,000 30,000
August \$15,000 \$150,000 20,000
September \$22,000 \$300,000 30,000
October \$19,000 \$200,000 15,000
November \$20,000 \$250,000 18,000
December \$15,000 \$130,000 12,000
QUESTION:

Using the appropriate cost driver (TOTAL SALES) use the high-low points method to calculate the variable rate and the fixed cost per month.

HINT: You do not need Employee Hours to solve this!

#### Solution Summary

A high-low points method and the high/low methods are examined.

\$2.19