A quick, widely taught way to estimate a mixed cost’s fixed and variable components using nothing more than the highest and lowest activity periods observed.
How it works
Dividing the cost difference between the high and low activity periods by their activity-level difference gives the variable cost per unit; subtracting that rate times the high activity level from the high-period cost gives the fixed cost component.
What this does not include
This does not include regression analysis, a more statistically robust way to estimate the same fixed/variable split using all available data points rather than just the two extremes — the high-low method is simpler but more sensitive to outliers.
How to use this calculator
- Enter the activity level and cost at both the high and low periods.
Frequently asked questions
Why is the high-low method considered less accurate than regression?
Because it only uses two data points (the extremes), completely ignoring every other observation — if either extreme is an outlier, the resulting fixed/variable split can be significantly skewed.
What kind of costs is this method used for?
Mixed (semi-variable) costs — expenses like utilities or maintenance that have both a fixed base component and a variable component that scales with activity.
Can this method produce a negative fixed cost?
In unusual cases with a low variable-cost-per-unit estimate relative to the data, yes — a mathematically negative result usually signals the two-point method isn’t a great fit for that particular cost’s real behavior.
