Quick Answer: Which Of The Following Is An Advantage Of The High Low Method?

What is the advantage of high low method?

One advantage of the high-low method is the lack of formality required.

The accountant can analyze these numbers using data from the monthly expenses and the activity level.

He does not need to contact anyone outside of the company to determine the fixed expenses or the variable rate per unit..

What is the High Low method formula?

The formula for developing a cost model using the high-low method is as follows: Once the variable cost per unit is determined: Fixed cost = Highest activity cost – (Variable cost per unit x Highest activity units) or. Fixed cost = Lowest activity cost – (Variable cost per unit x Lowest activity units)

What is the chief drawback of the high low method of cost estimation?

6-16 The chief drawback of the high-low method of cost estimation is that it uses only two data points. The rest of the data are ignored by the method. An outlier can cause a significant problem when the high-low method is used if one of the two data points happens to be an outlier.

Which of the following is an advantage of the high low method quizlet?

High-low method has several important advantages, including the following: -Objectivity: Any two people using the high-low method on a particular data set will arrive at the same answer. -Quick overview: The high-low method allows a manager to get a quick fix on a cost relationship by using only two data points.

Which of the following cost behaviors does not change in total?

Answer: This cost behavior pattern is called a fixed cost. A fixed cost describes a cost that is fixed (does not change) in total with changes in volume of activity. Assuming the activity is the number of bikes produced and sold, examples of fixed costs include salaried personnel, building rent, and insurance.

What exactly is a cost driver?

What is a Cost Driver? A cost driver is the direct cause of a cost. Fixed costs remain unchanged and its effect is on the total cost incurred. For example, if you are to determine the amount of electricity consumed in a particular period, the number of units consumed determines the total bill for electricity.

What is high and low point method?

High-low point method is a technique used to divide a mixed cost into its variable and fixed components. … Under high-low point method, an estimated variable cost rate is calculated first using the highest and lowest activity levels and mixed costs associated with them.

What are best fit lines?

Line of best fit refers to a line through a scatter plot of data points that best expresses the relationship between those points. Statisticians typically use the least squares method to arrive at the geometric equation for the line, either though manual calculations or regression analysis software.

Is Depreciation a fixed cost?

Depreciation is one common fixed cost that is recorded as an indirect expense. Companies create a depreciation expense schedule for asset investments with values falling over time. For example, a company might buy machinery for a manufacturing assembly line that is expensed over time using depreciation.

What is the advantage of regression analysis compared to high low method?

The high low method uses a small amount of data to separate fixed and variable costs. It takes the highest and lowest activity levels and compares their total costs. On the other hand, regression analysis shows the relationship between two or more variables. It is used to observe changes in the dependent variable.

What are the advantages of the scatterplot method over the high low method the high low method over the scatterplot method?

The high low over the scatterplot method? a.In the scatterplot method data is represented by points on a graph that represent the correlation of dependent and independent variables. One advantage of the scatterplot method over the high-low method is that it enables its users the abilityto visually interpret data.

When a mixed cost is graphed the slope of the line equals?

When a mixed cost is graphed the slope of the line equals: The total fixed cost.

What are the merits of scatter diagram?

The following are a few advantages of a scatter diagram: It shows the relationship between two variables. It is the best method to show you a non-linear pattern. The range of data flow, i.e. maximum and minimum value, can be determined.

How do you calculate the breakeven point?

Calculating your break-even pointTo calculate a break-even point based on units: Divide fixed costs by the revenue per unit minus the variable cost per unit. … When determining a break-even point based on sales dollars: Divide the fixed costs by the contribution margin.

What is the account analysis method?

Definition: The account analysis method is a cost accounting method for estimating the different costs associated with producing a product. … When a manager is trying to figure out how much it costs to make a product, he will divide the costs into three categories: variable, fixed, and mixed.