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For example - variable costs The high point of activity is...

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For example, using data from the following example, if 36,000 gallons of water and 60,000 gallons of  water were selected, the change in cost is $6,000 ($20,000 – $14,000) and the change in activity is  24,000 (60,000 – 36,000). This makes the slope of the line, the variable cost, $0.25 ($6,000  ÷   24,000), and the fixed costs $5,000. See the graph to illustrate the point.  High-low method . The  high-low method  divides the change in costs for the highest and lowest  levels of activity by the change in units for the highest and lowest levels of activity to estimate 
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Unformatted text preview: variable costs. The high point of activity is 75,000 gallons and the low point is 32,000 gallons. The variable cost per unit is estimated to be $0.163. It was calculated by dividing $7,000 ($20,000 – $13,000) by 43,000 (75,000 – 32,000) gallons of water. Least-squares regression analysis . The least-squares regression analysis is a statistical method used to calculate variable costs. It requires a computer spreadsheet program (for example, Excel) or calculator and uses all points of data instead of just two points like the high-low method....
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  • Spring '09
  • staff
  • variable costs., high­low method, Least­squares regression, Least­squares regression analysis., least­squares regression analysis

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