CHAPTER 3 High Low Method Forecasting a Mixed Cost
In Class Work Page 94				BlueDenim Company, Inc		Page 2
HIGH-LOW METHOD
Electricity Cost	Cost				Machine Hours
January	$ 3,255				460
February	$ 3,485				500
March	$ 4,100				600
April	$ 3,300				470
May	$ 3,312				470
June	$ 2,575				350
July	$ 3,910				570
August	$ 4,200				590
FYI: Total Cost=Total Fixed Cost +(Variable Rate * Activity)
Step 1. Find the High Low Activity for the data set
Step 2. Estimate the Variable Rate per unit using the High Low data
VARIABLE RATE	=	High Activity Cost-Low Activity Cost
		High Activity-Low Activity
	=		=
Step 3. Estimate the fixed cost component:
Fixed Cost= Total Cost at High Point - (Variable Rate X Activity at High Point)
Step 3: Form the cost formula for Electricity Cost
Total Cost = Fixed Cost from Step 3 + (Variable Rate from step 2 * Machine Hours)
Step 5. Estimate the total electricity cost for October based on 550 machine hours
Use your Formula created in step 4 to solve. Show your work.