The linearity assumption is
A)the assumption that the relationship between fixed costs and variable costs can be approximated by a straight line.
B)necessary to the high-low method of analyzing mixed costs.
C)realistic in all costing situations.
D)the assumption that total cost depends on activity level.

Question

Quizplus · Accepted Answer

The linearity assumption is necessary for the high-low method, which estimates fixed and variable costs by assuming a linear relationship between cost and activity level.

The Linearity Assumption Is