HLM Meaning and
Definition
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HLM is an abbreviation that stands for "High-Low Method." In the field of cost accounting and managerial decision-making, the High-Low Method is a technique used to separate fixed and variable costs from a series of mixed costs. The purpose of employing the High-Low Method is to estimate the behavior of costs and make informed business decisions based on that analysis.
The technique begins by identifying the highest and lowest levels of activity within a given period, such as the production volume or sales. The corresponding cost associated with each extreme point is then noted. By calculating the difference between these two points on both the cost and activity scales, the variable cost per unit of activity can be determined. The fixed cost, on the other hand, can be calculated by subtracting the variable cost from the total cost at either extreme point.
The High-Low Method assumes that the relationship between cost and activity is linear. While this assumption might not hold true in every situation, the technique provides a useful approximation for cost estimation in many practical scenarios. Though it is a simple and quick method of cost analysis, it may not yield highly precise results compared to more advanced statistical techniques or regression analysis.
In conclusion, HLM (High-Low Method) is a cost accounting technique employed to separate fixed and variable costs by determining the highest and lowest points of activity and cost within a given time period. It provides a basic estimation of cost behavior and helps in making informed decisions in a business setting.
Common Misspellings for HLM
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