High low method
The high low method enables accountants to separate fixed and variable costs from historical data, forming the foundation for accurate cost forecasting. Through a practical worked example using Swift plc, this lesson demonstrates how to apply the technique step-by-step and highlights critical considerations such as handling data outliers that can distort predictions.
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In this lesson
- 0:00 Introduction to Forecasting Techniques
- 1:09 Implementing the High Low Method
- 2:07 Worked Example: Swift plc Scenario
- 4:27 Conclusion: Impact of Outliers
About this lesson
Discover the simplicity and application of the high low method in forecasting, a technique that demystifies the complexities of separating variable and fixed costs using historical data. This video walks you through a step-by-step process, from identifying cost behaviours to creating accurate future cost estimates, despite potential pitfalls like data outliers. By examining a practical example with Swift plc, viewers will learn how to apply this method to predict total production costs effectively. Dive into this concise guide to enhance your forecasting skills and make informed financial decisions.
Duration: 5m
- Cost behaviour classification
- Variable and fixed cost separation
- High low method calculation
- Historical data analysis
- Cost forecasting and prediction
- Outlier impact on estimates
Transcript
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