Use the information below to answer the following question(s).
The Monroe Company uses the high-low method to estimate the cost function. The information for 2002 is provided below.

-When using the high-low method, the denominator in the equation that determines the slope is the
A) outcome variable.
B) predictor variable.
C) difference between the high and low observations of the cost driver.
D) difference between the high and low observations of the outcome variables.
E) the intercept.

Question

Use the information below to answer the following question(s).
The Monroe Company uses the high-low method to estimate the cost function. The information for 2002 is provided below.
 
-When using the high-low method, the denominator in the equation that determines the slope is the
A) outcome variable. 
B) predictor variable. 
C) difference between the high and low observations of the cost driver. 
D) difference between the high and low observations of the outcome variables. 
E) the intercept.

Quizplus · Accepted Answer

The high-low method involves calculating the slope of the cost function by dividing the difference in cost between the highest and lowest levels of the cost driver by the difference in the corresponding levels of the cost driver. Therefore, the denominator in the slope equation is the difference between the high and low observations of the cost driver.

Use the Information Below to Answer the Following Question(s)