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    The solution to High-Low method

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    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