Using the high-low method, managers use the two observations pertaining to the highest and lowest activity levels because these values are most likely to define any abnormal costs.

Question

Quizplus · Accepted Answer

The high-low method uses the highest and lowest activity levels to estimate the variable and fixed components of a cost, not to identify abnormal costs. It assumes a linear relationship between cost and activity across these points.

Using the High-Low Method, Managers Use the Two Observations Pertaining