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High-Low Cost Estimate & Activity Forecast

Estimate variable cost per activity unit and fixed cost from two activity observations, then forecast a chosen activity level.

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Calculator inputs

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How to use this calculator

  1. Enter the known values in the units shown. Results update as you type.
  2. Where results are editable, change one to solve backwards. Lock a value to hold it fixed.
  3. Use the worked example to check the method. Reset restores the starting fields.

Use the result with context

Results are estimates for planning and education. Confirm rates, taxes, fees, and legal requirements with the relevant institution or a qualified professional before making a financial decision.

Formula and method

Costs of 1,000 at 100 activity units and 1,600 at 200 units imply variable cost 6 per unit and fixed cost 400. At 150 units, estimated cost is 1,300.

Variable cost/unit = change in cost ÷ change in activity; fixed cost = high-activity cost − variable cost × high activity; estimated cost = fixed cost + variable cost × activity

Worked example

Enter these known values and leave the other values blank.

Cost at highest activity
1600 USD
Highest activity level
200
Cost at lowest activity
1000 USD
Lowest activity level
100
Activity level to estimate
150
Estimated variable cost per activity unit
6 USD
Estimated fixed cost
400 USD
Estimated total cost
1300 USD

Assumptions and limitations

  • Choose observations by highest and lowest activity, not by highest and lowest cost alone. Activity levels must differ.
  • This model uses nonnegative activity, fixed cost and variable cost. Equal observed costs allow a zero-variable-cost estimate.
  • The line uses only two observations and assumes stable cost behavior. It does not identify outliers or prove that extrapolation is reliable.

Common questions

Why must activity levels differ?

Their difference is the denominator used to estimate variable cost. Two observations at the same activity do not determine a slope.

Does the method use all observations?

No. It uses the two selected activity extremes. Other observations can help evaluate whether the resulting line is representative.

References

Bookify permits equal observed costs and checks nonnegative forecast activity and cost.

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