A high-low approach to establishing fixed and variable components of costs is most effective when information available is:
A)Curvilinear.
B)Erratic and highly fluctuating.
C)Outside of the relevant range.
D)Linear.

Question

Quizplus · Accepted Answer

The high-low approach involves taking the highest and lowest levels of activity and using them to determine the fixed and variable components of costs. This method assumes a linear relationship between the cost and the level of activity. Therefore, the information available should be linear to effectively use this approach.

A High-Low Approach to Establishing Fixed and Variable Components of Costs