The High-Low Method Unit variable cost = $4,000 ÷ 5,000 units = $.80 per unit.
{"Image DocumentName": "The High-Low MethodUnit variable cost =  4,000 \u00f7 5,000 units =  .80 per unit.", "Image ImageDescription": "Fixed cost = Total cost \u2013 Total variable cost Fixed cost =  9,700 \u2013 ( .80 per unit \u00d7 10,000 units) Fixed cost =  9,700 \u2013  8,000 =  1,700. Total cost = Fixed cost + Variable cost Total cost =  1,700 +  0.80X. Part One. First we determine the change in activity and the change in cost. Part Two. To determine the variable costs per unit of activity, we divide the change in cost by the change in production activity. In our case, the change in maintenance cost is four thousand dollars and the change in units produced is five thousand. The result is a variable cost rate of eighty cents per unit produced. Part Three. Next, we calculate the fixed cost by subtracting the total variable cost from the total cost. Since total cost and total variable cost are different amounts at different activity levels, we must choose either the high level or the low level for our computations. Let\u2019s choose the high level of activity, ten thousand units. Our first step is to calculate the total variable cost. At ten thousand units, the total variable cost is eighty cents per unit times ten thousand units resulting in a total variable cost of eight thousand dollars. Next, we subtract eight thousand dollars from the total cost at the high activity, to get the fixed cost, one thousand seven hundred dollars. We will obtain the same result if using the low level of activity to compute fixed cost. Part Four. Now, we can write a linear equation using our variable cost of eighty cents per unit and our fixed cost of one thousand seven hundred dollars. Total cost equals one thousand seven hundred dollars plus eighty cents per unit for any number of units within the relevant range.", "Image XResolution": "37", "Image YResolution": "37", "Image ResolutionUnit": "Pixels/Centimeter", "Image Software": "SlidePlayer", "Image YCbCrPositioning": "Centered"}