Answered: Explain why cost predictions based on…

Explain why cost predictions based on the same cost driver can differ when applying the high-low method and regression analysis. State one advantage and one disadvantage of the high-low method.

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter4: Accounting For Factory Overhead

Section: Chapter Questions

Problem 7Q: What is the basic premise underlying the high-low method of analyzing semivariable costs?

See similar textbooks

Related questions

Q: f the following statements related to cost ?estimation methods is true .a None of the given answers…

A: Option d is correct The three methods determine a slope and an intercept…

Q: argin, Operating Leverage, How to accept or reject “one time only special offers”, Irrelevant costs.

A: 1. Safety Margin: Marginal safety is an amount by which the actual sales exceed the break-even…

Q: R-squared is a measure of a. The spurious relationship between cost and activity D. The fxed cost…

A: R-Square measures that how much variation of a dependent variable is explained by a independent…

Q: What is the chief drawback of the high-low method of cost estimation? What problem could an outlier…

Q: Another of Matilda’s colleagues is looking at the yield curve and asks for an explanation as to why…

A: Biased expectation theory is defined as the theory of term structure of the rate of interest. In the…

Q: . What is the difference between variable and fixed costs? Also explain how the total variable cost…

A: " Since you have posted more than two questions and not specified which should be solved so we are…

Q: Marginal costing can provide useful information for decision-making. However, there are limitations…

A: There are various limitations of marginal costing few of them are stated below.

Q: Which of the following statements related to cost estimation methods is false? The least-squares…

A: Following is the answer to the given question

Q: In applying the high-low method of cost estimation to mixed costs, how is the total fixed cost…

A: Mixed cost also called the semi variable cost . Mixed cost contains both fixed and variable cost .…

Q: High-low and regression cost estimation methods are alike in that they both: Select one: O a. Have a…

Q: Which cost estimation method is the least accurate or the most subjective? account analysis…

A: Account analysis method of cost estimation decided whether the cost is fixed or variable it depends…

Q: Which of the following is NOT true of regression techniques for estimating costs?

A: Cost: Cost can be defined as the cash and cash equivalent which is incurred against the products…

Q: Which of the following statements related to cost estimation methods is true ? a . Only high -low…

A: When the total cost for the expenses change or does not change with the change in the output, it…

Q: differential costs where you had to choose between two alternatives

A: Differential cost refers to the difference between the cost of two or more alternative options. It…

Q: Search about how different techniques are efficient to estimate cost. – Engineered estimate of cost…

A: Four regular methodologies are utilized to appraise fixed and variable expenses: Record…

Q: Cost-Capacity calculation technique takes into account a constant exponent to relate different costs…

A: Sensitivity analysis is financial analysis that determine The potential percent gain or loss in…

Q: What is the difference between a linear and a nonlinear cost function? Give an example of each type…

A: Cost Function:Cost function represents the basic change comes in the total cost due to the change in…

Q: What is the primary disadvantage of basing the costplus pricing formula on absorption cost?

A: Definition: Cost plus-pricing approach: The pricing approach used by the companies to set the target…

Q: The high-low method used in determining costs can be used to estimate the cost queation using just…

Q: Differential Costs are the difference in cost between any two alternative choices True False

A: Differential cost is the cost difference when two alternatives are projected. It also the cost…

Q: “All the independent variables in a cost function estimated with regression analysis are cost…

A: Cost driver: Cost driver is one of the measurements that help the company in tracing directly the…

Q: Absorption costing is more compatible with cost-volume-profit analysis than is variable costing.…

A: Variable costing simply covers the variable costs actually incurred in production, but not any of…

Q: 12) Which of the following techniques is not used to analyze cost bechavior? A) Least-squares…

A: Cost Accounting: It is the process of collecting, recording, analyzing the cost, summarizing cost,…

Q: 2) Which of the following techniques is not used to analyze cost behavior? A) Least-squares…

A: Cost Accounting: It is the process of collecting, recording, analyzing the cost, summarizing cost,…

Q: How is uniform cost search different from plain BFS?

A: UCS : Uniform Cost Search is an uninformed search algorithm. It cannot deal with a heuristic…

Q: Which of the following statements related to cost estimation methods is true? The low-high method is…

A: All four methods of cost estimation has its own pros and cons. For quick estimate requirement,…

Q: The simplifying assumption that costs and volume vary in straight-line relationships makes the…

A: Cost Volume Profit Analysis is a method of costing that has an impact on the varying levels of cost…

Q: simple cost analysis method to identify fixed costs and variable costs in a linear cost function is…

A: High low method is method which separates the elements of fixed cost and variable cost from the…

Q: Which of the following statements related to cost estimation methods is false? O a. The…

A: When some cost is showing combined effect of variable and fixed cost i.e. it is semi variable and…

Q: In using least-squares to estimate the variable and the fixed components in a mixed cost, these two…

A: Least Square method (Linear regression) is a very accurate method for dividing cost into variable…

Q: An easy way to estimate the variable and fixed costs components of a mixed cost is by: 1. a scatter…

A: There are two main cost estimation methods used to estimate amounts of fixed and variable costs are…

Q: Which of the following statements related to cost estimation methods is false? O a. The most complex…

A: Cost estimation methods means by which method variable costs and fixed costs of the business can be…

Q: Which of the following methods of cost estimation relies on only two data points?A. the high-low…

A: Cost accounting is one of the important branch of accounting, under which costs are being…

Q: Which of the following statements related to cost estimation methods is true? O a. The most complex…

A: Option c is correct.

Q: Which of the following statements is true? Select one: one: a. The most complex of the cost…

A: High-low method: It is the method of estimating the variable cost per unit and the fixed costs by…

Q: In order to draw a basic break-even chart, which of the following information would you not require?…

A: The break even sales are the sales where business earns no profit no loss during the period. The…

Q: Least-squares regression is a statistical method for identifying cost behavior. True or False True…

A: According to the given question, we are required to give the answer that the statement is true or…

Q: Explain the behavioral problem that can result when cost-plus prices are based on variable cost.

A: Following is the answer to the given question

Question

Explain why cost predictions based on the same cost driver can differ when applying the high-low method and regression analysis. State one advantage and one disadvantage of the high-low method.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Explain how the high-low method is used for cost estimation. What, if any, are the limitations of this approach to cost estimation?
When is multiple regression required to explain cost behavior?
Which of the following is one of the two approaches used to analyze data in the decision to keep or discontinue a segment? A. comparing contribution margins and fixed costs B. comparing contribution margins and variable costs C. comparing gross margin and variable costs D. comparing total contribution margin under each alternative
What is the basic premise underlying the high-low method of analyzing semivariable costs?
List the acceptable cost flow assumptions under IFRS. Be sure to explain the reasoning as to why IFRS find certain cost flow assumptions unacceptable.
Which of the following is NOT true of regression techniques for estimating costs? a) They permit the inclusion of more than one predictor. b) They typically use the highest and lowest activity points to estimate the relation between cost and activity. c) They help develop estimates that have a broader base than those based on a few select points. d) They are designed to generate a line that best fits a set of data points.
Which 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.
From the standpoint of cost control, why is the FIFO method superior to the weighted-averagemethod? Is it possible to monitor cost trends using the weighted-average method?
Which of the following statements related to cost estimation methods is false? 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. O b. 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. The three methods determine a slope and an intercept. O d. None of the given answers. The most complex method of cost estimation is the high-low method.
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 answers
Obtaining regression estimates for cost estimation requires establishing the existence of a logical relation between activities and the cost to be estimated. Which of the following is not used to refer to these activities? Multiple Choice predictors. dependent variables. X terms. independent variables.
_____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.