Defining Terms for the High-Low Method
Indicate whether each of the following statements about the high-low method is true or false:
a. The formula for the high-low method is
b. The high-low method can be expressed as
c. The high-low method forces a he between the two most extreme activity data points.
d. The high-low method relies on the fact that the slope of a hit is calculated as “run” over rise.
e. When using the high-low method, the slope of the line is interpreted as the fixed-cost component of a mixed cost.
Want to see the full answer?
Check out a sample textbook solutionChapter 5 Solutions
Managerial Accounting
- Fixed cost per unit ______ A. Can be estimated by the high - low method. B. Remains the same when the level of activity changes. C. Are represented by the slope of the total cost line. D. All of the above answers are correct.arrow_forwardR-squared is a measure of a. The spurious relationship between cost and activity b. The fxed cost component C The variable cost per unit activity d. How well the regression line accounts for the changes in the dependent variablearrow_forwardThe graph of a variable cost when plotted against its related activity base appears as a a.circle b.straight line c.rectangle d.curved linearrow_forward
- Which of the following statements related to cost estimation methods is true ? a . Only high -low method has a slope and an intercept . b. The scatter - graph method is used to derive an estimated line of cost behavior by graphically connecting the two cost amounts identified with the highest and lowest volume levels . c. The most complex method of cost estimation is the high - low method . d. The least -squares regression method is the most accurate and reliable method to determine the cost behavior compared to scatter -graph plot and high -low methods . e. None of the given answersarrow_forwardWhich of the following is true about the hypothesis test of cost parameters? a) It indicates whether the parameters are different from zero. b) It provides a range of values instead of a single prediction. c) It measures the degree of association between cost and activity output. d) It shows the difference between predicted and actual costs.arrow_forwardWhich of the following methods of cost estimation relies on only two data points? A. the high-low method B. account analysis C. least-squares regression D. SWOT analysis.arrow_forward
- Which of the following graphs best illustrates fixed costs per unit as the activity base changes?arrow_forwardIn the mixed cost function Y = A + BX, total variable costs is represented by: a. A + BX b. A c. Y d. BXarrow_forwardWhich of the following statements related to cost estimation methods is true? O a. The most complex method of cost estimation is the high-low method. O b. The high-low method is the most accurate and reliable method to determine the cost behavior compared to scatter-graph plot and least-squares regression methods. O c. The low-high method is used to derive an estimated line of cost behavior by graphically connecting the two cost amounts identified with the highest and lowest volume levels. O d. Only high-low method has a slope and an intercept. O . None of the given answers.arrow_forward
- The increase/decrease in variable cost from existing level to the new level is called as __cost. a.Standard b.Marginal c.Fixed d.Opportunityarrow_forwardIn describing the cost formula equation Y = a + bX, which of the following statements is NOT correct? (A As "X" increases "Y" increases. (B) "X" is the level of activity. In the high-low method, "b" equals change in activity divided by change in costs. "a" is the fixed component.arrow_forward_____Identifying the relationship between the activity and the costs is a key step in which of the following cost estimation methods? a) Scattergraph. b) High-low method. c) Linear regression. d) Account analysis.arrow_forward
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegeSurvey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning