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

Currently, once we establish when we identify,
individuals, that there is a relationship in between 2 variables, we still intend to think of
the equation of that line, the Y equals A plus B times X. One manner in which we can do that, kind of a fast
and also filthy little means, is what is understood as the highlow method. And also the purpose, once again, is to determine
the formula of the mixed expense. That Y amounts to A plus B times X, okay? Currently I'' ve found out that the most effective means to instruct
We'' re going to do an instance here. Okay, here is a series of months as well as the devices
produced as well as the complete price for every. And also allow'' s claim we really feel that these, this is
a situation that is a combined cost. And we did that, possibly, by plotting out
a scatter representation. Okay, the first thing that we desire to do below
is identify which of these columns is the X variable and also which among these is the Y.
variable.Okay, well which is the X variable? Units produced. Okay. And complete expense is the Y variable, okay? Now what we do, come off that if you would. and show me, is once we ' ve recognized the y and the x there we go, show all of it if you. can. After that what we wish to do, really, is we kind. of intend to cover up the Y ' s, put on ' t also check out them.Just check out your X ' s. And I want you to figure out which of these. is the greatest X and which of these is the most affordable X. I ' m not asking you which is the highest Y. as well as cheapest Y no, no, no. Conceal the Y
' s so you ' re not also tempted. to check out them today. Which of these of these is the highest possible X? Which of these is the most affordable X? Okay. Going back to the computer, once you do. that, which is the greatest X? > > February.
> > February, fine? >>That ' >>s the high. Which of these is the cheapest X? > > June. > > June. That is the reduced. >>You with me? Okay. So, what we ' re mosting likely to do then, as soon as we ' ve. determined the high month and the low month, we ' re mosting likely to in fact make use of all the data from.
those months now, and also we are going to determine the equation of the blended cost, alright? The very first thing that we'' re mosting likely to do is. we ' re going to establish the variable cost, fine? Allow me go back over the record video camera,.
all right? Okay.The initial

point we'' re mosting likely to solve for is.
B, which is the variable price. Well that equals the modification in Y over the.
change in X of the high and also the nadir, alright? The modification in Y is is it 29,000 minus 20,500? Somebody help me oops, I just wrote on that. >>> > That ' s right >>. > > Okay. Split by the adjustment in X of the high and.
the nadir. To ensure that would be 67,500 units minus 17,500.
units; is that correct? >>> > Yup. >>> > So if you calculate that out, that appears.
to 17 cents an unit. That is the B in our line. Are you with me? Okay. Currently the next step is we wish to fix for.
The way we'' re going to do that is we'' re going. From the high or the reduced point.So going back to the computer, we ' re going. Either method it ' ll offer us the exact same solution.
like it'' s sometimes easier math, all right? What is the Y what is Y at the reduced point? >> > > 20,500. > > 20,500. A'is what we ' re attempting to solve for. What is X at the reduced? >>> > 17,500. > > 17,500; is that right? Okay. So as soon as you do that you get 20,500 amounts to.
A plus let'' s see what.17 times 17,500 equates to. I believe that ' s 2,975 >>. > > I can hardly see it. >>> > Thank you. So 20,500 amounts to A plus 2,975. What does An equal? 17,525? Okay. So we now have our B and we now have our A,.
fine? Now let me reveal you exactly how I don'' t like you to. reveal this response. Some trainees will certainly compose this out, they'' ll. state Y amounts to 17,525 plus.17 X. Well, yeah, sort of.But allow'' s go on and specify these variables.
for this details scenario. What does Y, in this situation, equivalent? We'' re looking back at the computer system, Y equates to.
total expenses, right? So let'' s claim overall expenses amounts to \$ 17,525 plus.
— well, what does X equal in this instance? Systems created, right? So allow'' s say 17 cents each produced times.
the variety of devices produced. Currently, doesn'' t that simply provide you a better warm.
unclear in your tummy that you actually recognize what this what we actually did was? Okay. Since currently what can we do? Well, currently what we can do is once we have that.
equation right there, let'' s claim we anticipate a task degree of 20,000 units. Well, what would certainly we expect to be our total.
costs? Well, we can plug it right into that equation as well as.
Okay, that'' s why we want that formula. (Faint) prices is a significant part of running.
a service. Are you with me?.

Contact Us

Scroll to Top