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.
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MANAGERIAL ACCOUNTING >C<
- Which of the following statements is true regarding average fixed costs? A. Average fixed costs per unit remain fixed regardless of level of activity. B. Average fixed costs per unit rise as the level of activity rises. C. Average fixed costs per unit fall as the level of activity rises. D. Average fixed costs per unit cannot be determined.arrow_forwardWhich statement is correct? A. Activity-based cost systems are less costly than traditional cost systems. B. Activity-based cost systems are easier to implement than traditional cost systems. C. Activity-based cost systems are more accurate than traditional cost systems. D. Activity-based cost systems provide the same data as traditional cost systems.arrow_forwardWhich of the following graphs best illustrates fixed costs per unit as the activity base changes?arrow_forward
- What is the scattergraph method, and why is it used? Why is a scattergraph a good first step in separating mixed costs into their fixed and variable components?arrow_forwardDescribe how the scattergraph method breaks out the fixed and variable costs from a mixed cost. Now describe how the high-low method works. How do the two methods differ?arrow_forwardWhich 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 alternativearrow_forward
- The variable overhead efficiency variance is caused by the difference between which of the following? A. actual and budgeted units B. actual and standard allocation base C. actual and standard overhead rates D. actual units and actual overhead ratesarrow_forwardFor the following activities and their associated resources, identify the following: (1) a cost driver, (2) flexible resources, and (3) committed resources. Also, label each resource as one of the following with respect to the cost driver: (a) variable and (b) fixed.arrow_forwardWhy is a scattergraph a good first step in separating mixed costs into their fixed and variable components?arrow_forward
- In the cost equation TC = F + VX, “V” is best described as the: Multiple Choice intercept of the cost equation. total costs that do not vary with changes in the activity level. activity level used to estimate the dependent variable. slope of the cost equation.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_forwardGiven below is a numbered list of cost terms. For the given definition statement. '_____ costs are those which are unaffected by changes in activity level over a feasible range of operations for the capacity available.', place the number of the cost term in the blank that makes the statement a correct definition. Each cost term is used only once.arrow_forward
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