Mini-Video – Accounting 2 – Chapter 21 “The High-Low Method”

Now, once we establish when we identify,
folks, that there is a relationship between two variables, we still wish to come up with
the formula of that line, the Y equals A plus B times X. One manner in which we can do that, sort of a fast
and also filthy little means, is what is called the highlow approach. And the purpose, once more, is to calculate
the formula of the blended cost. That Y equals A plus B times X, all right? Now I'' ve discovered that the very best way to educate
We'' re going to do an example right here. Okay, here is a series of months and also the units
generated and the total price for each. As well as let'' s state we really feel that these, this is
a scenario that is a mixed expense. As well as we did that, possibly, by plotting out
a scatter representation. Okay, the very first point that we desire to do right here
Just look at your X ' s. As well as I want you to determine which of these. Cover up the Y
' s so you ' re not even tempted. > > February.
> > February, alright? >>That ' >>s the high. Which of these is the most affordable X? > > June. > > June. That is the low.You with >>me? Okay. What we ' re going to do after that, when we'' ve. identified the low month as well as the high month, we ' re going to actually utilize all the data from.
The very first thing that we'' re going to do is. Allow me go back over the file video camera,.
all right? Okay. The very first thing we'' re mosting likely to fix for is.
B, which is the variable price. Well that equates to the adjustment in Y over the.
change in X of the high as well as the nadir, fine? So the modification in Y is is it 29,000 minus 20,500? Someone help me oops, I just composed on that particular.

>>> > That ' s right >>. > > Okay. Separated by the change in X of the high and.
the nadir. That would be 67,500 devices minus 17,500.
devices; is that proper? >>> > Yup. >>> > So if you compute that out, that comes out.
to 17 cents a system. That is the B in our line. Are you with me? Okay. Currently the following step is we wish to fix for.
A, which is our set cost.The way we

' re mosting likely to do that is we'' re going. to, as soon as again, take into consideration the whole formula of a blended expense. We simply solved for B, okay? Now what we'' re going to do is'we ' re going. to borrow the Y and the X from either the high or the reduced point, okay? From the high or the low factor. Going back to the computer system, we'' re going.
> > 20,500. > > 20,500. A'is what we ' re trying to address for.
A plus allow'' s see what.17 times 17,500 equals.I assume that'' s 2,975. > > Thank you. We currently have our B and we currently have our A,.
Currently allow me reveal you exactly how I put on'' t like you to. Some trainees will compose this out, they'' ll. Let'' s go in advance and specify these variables.
for this particular scenario. What does Y, in this circumstance, equal? We'' re recalling at the computer, Y equates to.
overall expenses, right? Allow'' s claim complete costs equals \$ 17,525 plus.
— well, what does X equivalent in this instance? Devices produced, right? Allow'' s say 17 cents per system produced times.
the number of units produced. Now, doesn'' t that simply provide you a better warm.
Because currently what can we do? Well, currently what we can do is once we have that.
Well, we can plug it right into that equation and. As managers( faint )costs. (Faint) costs is a massive part of running.
Are you with me?.