High-Low Method Calculator

Split a mixed cost into its fixed and variable components using the highest and lowest activity levels, then forecast total cost at a target activity level.

Quick Facts

Variable cost formula
VC/unit = (High cost − Low cost) / (High activity − Low activity)
Fixed cost = High cost − (VC/unit × High activity).
Data needed
Only the highest and lowest activity periods
Every other period is ignored, so the split is fast but sensitive to outliers.

Your Results

Calculated
Variable cost per unit
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Cost that changes with each unit of activity
Total fixed cost
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Cost that stays constant regardless of activity
Cost equation
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Y = fixed cost + (variable cost × activity)
Estimated cost at forecast level
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Projected total cost at your forecast activity

Ready

Enter your highest and lowest activity levels and their costs, then press Calculate.

How the High-Low Method Calculator works

The high-low method is a cost accounting technique for splitting a mixed (semi-variable) cost — one that has both a fixed component and a component that scales with activity — into its two parts using only the highest and lowest activity levels in your data. It requires no statistical software, just two data points: the period with the most activity and the period with the least.

The formula

Variable cost per unit is the change in cost divided by the change in activity between the two extreme periods:

Variable cost per unit = (Cost at highest activity − Cost at lowest activity) / (Highest activity − Lowest activity)

Once you know the variable cost per unit, fixed cost is whatever is left over after removing the variable portion from either extreme period's total cost:

Fixed cost = Total cost at highest activity − (Variable cost per unit × Highest activity level)

The same fixed cost should come out whether you use the high point or the low point, since both lie on the same straight-line cost equation Y = Fixed cost + (Variable cost per unit × X), where X is the activity level and Y is total cost.

Worked example

Suppose the busiest month had 1,600 machine hours and cost $22,000, while the slowest month had 800 machine hours and cost $14,000. Variable cost per unit is ($22,000 − $14,000) / (1,600 − 800) = $8,000 / 800 = $10.00 per hour. Fixed cost is $22,000 − ($10.00 × 1,600) = $22,000 − $16,000 = $6,000. Checking with the low point: $14,000 − ($10.00 × 800) = $14,000 − $8,000 = $6,000 — the same answer. At a forecast level of 1,200 machine hours, estimated total cost is $6,000 + ($10.00 × 1,200) = $18,000.

Choosing the high and low points

  • Select periods by activity level (units produced, machine hours, labor hours), not by total cost — the highest-cost period and the highest-activity period usually match, but not always.
  • Use data from the same cost account across enough periods that the two extremes reflect normal operating conditions, not a shutdown, strike, or one-off spike.
  • If the highest and lowest activity levels are close together, the resulting split is less reliable — a wider spread gives a more stable estimate of variable cost per unit.

Limitations

Because the high-low method uses only two observations, it ignores every other data point and is sensitive to outliers — an unusually cheap or expensive extreme period will distort both the variable-cost and fixed-cost estimates. It also assumes the cost behaves in a straight line across the entire range, which can break down near capacity limits. When more data is available, least-squares regression or a scattergraph analysis will generally produce a more reliable split; treat the high-low result as a fast estimate for budgeting, cost-volume-profit analysis, or a first pass before deeper analysis.

Frequently Asked Questions

How does the high-low method work?
The high-low method separates a mixed (semi-variable) cost into its fixed and variable parts using only the highest and lowest activity levels observed. Variable cost per unit equals (cost at the highest activity level minus cost at the lowest activity level) divided by (highest activity level minus lowest activity level). Fixed cost is then found by subtracting variable cost times activity from the total cost at either the high or low point.
Why does the method use only two data points?
The high-low method is a quick estimation technique, not a statistical fit. Using only the highest and lowest activity periods keeps the arithmetic simple and requires no special software, but it means every other observation is ignored. If either extreme period was unusual (a shutdown, a one-time surge), the split will be skewed. Regression analysis or a scattergraph uses every data point and is more reliable when you have it available.
What if the period with the highest cost is not the period with the highest activity?
Select the high and low points by activity level, not by cost. The high-low method assumes cost varies with activity, so the highest-activity period and lowest-activity period are used even if a different period happened to have a slightly higher or lower total cost due to noise. If cost and activity consistently move in opposite directions, that's a sign the account is not a simple mixed cost and the method may not fit well.
What are the limitations of the high-low method?
Because it relies on just two data points, the high-low method is sensitive to outliers and can misstate the true fixed-variable split if either extreme period is unrepresentative. It also assumes strictly linear cost behavior across the whole range, which may not hold near capacity limits or very low activity. Treat the result as a fast estimate for budgeting and CVP analysis, and validate with regression or more data points when precision matters.

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