The high-low method:
A) Utilizes the average and the mean values of costs to determine fixed and variable costs.
B) Utilizes the high and low values of aggregate costs to estimate total fixed costs and the unit variable costs.
C) Utilizes regression analysis to estimate total fixed costs and the unit variable costs.
D) Requires cost items to be specifically classified as fixed costs or variable costs to be utilized.

Question

Quizplus · Accepted Answer

The high-low method uses the highest and lowest values of aggregate costs to estimate total fixed costs and unit variable costs. It assumes that the highest and lowest points represent the extremes of fixed and variable costs, respectively. This method is simple, easy to apply, and widely used in practice.

The High-Low Method