Here's our second example, again depicted in a scatter plot. And again let me make a suggestion about which observation to use as the typical low activity observation, and which to use as the high activity observation. Let's use, we'll use this one as the typical low activity observation, cost 310,000. And the number of units, 2,000, And then let's use typical, okay, this one as our typical high activity observation. Cost are 805,000, And the activity level was 11,000 units. So take a few minutes give it a try, then come back again, we'll see how you did and I'll meet you at that light board. Well, welcome back, how did you do with your second turn on the high low method? Let's take a look and see how you did. Now recall with the high low method, the first thing we need to do is identify that typical low activity level observation, and the typical high activity level observation. And recall that we did that before I sent you off to take your turn. So, let's just remind ourselves that we had decided to use, as our low activity level observation. This point, total cost or $310,000, and the activity level was 2,000 units. And we had decided to use this point as our typical high activity level observation where total costs are $805,000 and the activity level was 11,000 units. So that's the first step, and recall the second step with the high low method is to calculate the variable cost per unit. And we can do that from these two points, so if both points have the same level of fixed cost, we would expect any change in the costs between those two points to be due to the variable cost base, okay. Let's see how we do that, we take 805,000 minus the 310,000 and we divide by the change in the number of units. So we see that costs change by 495,000 for a change in activity of 9,000 units. So, if costs go up by 495 when the number of units goes up 9,000 then our variable cost per unit is $55. Okay, pretty straight forward as long as we have agreed on what the high and the low activity level observation are, so we get our variable cost per unit. Then we move to the third step, this third step is the step where we calculate our fixed costs. How do we do that? We start with the total cost at either of these points, it doesn't matter, we can choose either one. And subtract from the total cost that portion that's variable, and then what's left will be the fixed cost. Well, let's start with the low activity level observation, should work equally well with both of them. We have a total cost of $310,000, we're going to subtract the variable portion from that. Our variable cost at a $55 per unit, Multiply that times the number of units. So our variable cost, total variable cost here at this observation would be 110,000. So the amount that's left over is the fixed cost, we have total cost of 310, variable cost of 110, so, we've got a fixed cost piece of $200,000. We could've chosen the high activity level observation to do this calculation. Let's just prove that it works, it should work, right, we should come out with the same number. 805,000 minus the variable cost, $55 per unit, times the number of units, 11,000. So that is, let's see, $605,000, all right, so we start with total cost of 805,000, 605 of which is variable. And what we see is that we have then fixed cost of $200,000. Now this makes sense, right, because exactly what you would expect, the fixed cost piece is the same at both of these points and then the variable cost per unit is the same. All right, so we gather all this information together, that we've just pulled together from our analysis and our calculations, and we can write the equation of the line. So our slope is the variable cost per unit, And our fixed cost would be the point at which this would intersect the y axis, so we've estimated that to be $200,000. How did you do? I bet you did quite well, nice work.