What is the basic difference between account classification method and high-low method as applied in cost estimation?

Management Accounting Block Revision Mock Exams

In the account classification method, costs are simply distinguished as either fixed or variable, just like they are recorded in the books. The method may not be very objective as it depends a lot on the analysis judgement.

In the high-low method (Range Method), the cost figures for the highest and lowest output levels are compared. Their difference is taken to represent the variable costs. When this difference is divided by the difference in units, the variable cost per unit is obtained. This can then be substituted into either the high or low level costs and the fixed costs obtained. The method is reliable and objective, but uses only two sets of data.

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