High Low and Least Squares

Olympic Trainers Company provides a personalized training program that is popular with many companies. The
number of programs offered over the last five months, and the costs of offering these programs are as
follows:

Programs Offered Costs Incurred

Jan 55 P15,400
Feb 45 14,050
Mar 60 18,000
April 50 14,700
May 75 19,000

a. Using the high-low method, compute the variable cost per program and the total fixed cost
per month.
b. Using the least squares regression method, compute the variable cost per program and the
total fixed cost per month.

ANS:
a. Variable cost per program:

Change in costs P19,000 - P14,050 = P165 per program

Change in activity 75 - 45

Fixed cost:
At high activity = P19,000 - (75 ´ P165) = P6,625 per month
At low activity = P14,050 - (45 ´ P165) = P6,625 per month

b. x y xy x2
55 P15,400 P 847,000 3,025
45 14,050 632,250 2,025
60 18,000 1,080,000 3,600
50 14,700 735,000 2,500
 75  19,000  1,425,000  5,625
285 P81,150 P4,719,250 16,775

= 57

= 16,230

b = 4,719,250 - (5 57 16,230) (16,775 - (5 57 )

b = 176.79
a = 16,230 - (176.79 57)
a = 6,152.97