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

A high-low approach involves selecting the highest and lowest levels of activity and using them to determine the fixed and variable components of costs. This method works best when the information is linear, meaning that the relationship between cost and activity is consistent across all levels of activity. When the information is curvilinear, erratic and highly fluctuating, or outside of the relevant range, the high-low approach may not produce accurate results.

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