Health Care Finance

Health Care Finance

The High Low concept in accounting is a quick and simple way of calculating fixed and also variable costs in a mixed cost scenario. The simplicity of its calculations and the speed is its strongest advantages as it relies on two sets of figures from the mixed costs to arrive at the required values however anomalous figures may result in misleading calculations hence inaccurate figures.

MonthTotal No of Training PacksTotal CostComm College No. PacksComm Col Cost
Jan100062002001240
Feb2001820  
Mar2502350  
Apr4003440  
May70049003002100
Jun3002730  
Jul1501470  
Aug1001010  
Sep110071503001950
Oct3002850  
Nov2502300  
Dec1001010  

Question one requires the omission of the community training packs. The highest numbers of packs were registered in September where 1100 packs were utilized at a total cost of $7150 while the lowest numbers of packs were registered in August and December where only 100 packs were utilized at a cost of $1010.

Sep (Highest)11007150
   
Dec (Lowest)1001010
 1100-100 = 10007150 – 1010 = 6140
Difference10006140
Divide6140/1000 = 6.14

The estimated variable cost per unit is $6.14. The fixed cost for the highest values = total costs minus variable costs. Total costs = $7150 less variable costs equals to 1100 x 6.14 = 7150 – 6754 = $396.

For the lowest = Total costs = $1010 less variable costs equals to 100 x 6.14 = 1010 – 614 = $396. Fixed costs = $396 (Principles of Accounting.com, n, d). The other costs are:

MonthTotal No of Training PacksTotal CostVariable CostsFixed costs
Jan10006200614060
Feb20018201228592
Mar25023501535815
Apr40034402456984
May70049004298602
Jun30027301842888
Jul1501470921549
Aug1001010614396
Sep110071506754396
Oct300285018421008
Nov25023001535765
Dec1001010614396

2). The major disadvantage of high low is its restriction to the use of only two sets of values and when the mixed costs are anomalous then it may lead to inaccurate results like in the case of the figures below where the fixed costs are varied. The best method would be to use the least squares method which literally overcomes the disadvantage of high low as it utilizes many values when calculating the fixed and variable costs.

References Principles of Accounting.com (n, d) Chapter 18: Cost-Volume-Profit and Business Scalability retrieved July 17, 201

Looking for Discount?

You'll get a high-quality service, that's for sure.

To welcome you, we give you a 20% discount on your All orders! use code - NWS20

Discount applies to orders from $30
All Rights Reserved, Nursingwritingservice.com
Disclaimer: You will use the product (paper) for legal purposes only and you are not authorized to plagiarize. In addition, neither our website nor any of its affiliates and/or partners shall be liable for any unethical, inappropriate, illegal, or otherwise wrongful use of the Products and/or other written material received from the Website. This includes plagiarism, lawsuits, poor grading, expulsion, academic probation, loss of scholarships / awards / grants/ prizes / titles / positions, failure, suspension, or any other disciplinary or legal actions. Purchasers of Products from the Website are solely responsible for any and all disciplinary actions arising from the improper, unethical, and/or illegal use of such Products.