# The solution to High-Low method

High-Low Method

Manchester Foundry produced 45,000 tons of steel in March at a cost of £1,150,000. In April, the

foundry produced 35,000 tons at a cost of £950,000. Using only these two data points, determine the

cost function for Manchester.

What is the slope?

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#### Solution Preview

We have these data points:

35,000 tons costs £950,000

45,000 tons costs £1,150,000

Notice the difference between the high of 45,000 tons produced and 35,000 tons produced is (45,000 tons - 35,000 tons) = 10,000 tons with a matching change in costs of (£1,150,000 - £950,000) = £200,000.

We can calculate the variable cost per ton at £20 per unit (£200,000 / ...

#### Solution Summary

High-Low Method example and general explanation

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