The high-low method
A)is a useful means of predicting the highest cost a company will incur in the operating period.
B)is a useful means of separating fixed and variable elements from a mixed cost.
C)is more time-consuming than the scatter diagram method.
D)is more complex than the use of linear regression analysis.

Question

Quizplus · Accepted Answer

The high-low method involves identifying the highest and lowest levels of activity and their corresponding costs, and using this information to separate the fixed and variable elements of a mixed cost. This method is less complex and less time-consuming than linear regression analysis. Therefore, B is the correct answer. A is incorrect because the high-low method does not predict the highest cost, but rather separates costs into fixed and variable components. C is incorrect because the high-low method is often quicker than other methods like scatter diagrams. D is incorrect because the high-low method is less complex than linear regression analysis.

The High-Low Method