One of the simplest methods to measure a linear cost function from past data is the
A) account method.
B) high-low method.
C) least-squares regression method.
D) mixed cost method.

Question

Quizplus · Accepted Answer

The high-low method is a simple and quick method to estimate a linear cost function from past data. It involves taking the highest and lowest activity levels and the associated costs, and then calculating the slope (variable cost per unit) of the line between these two points. Once the slope is calculated, the fixed cost can be determined by plugging in any point from the data and solving for the intercept. While the least-squares regression method may provide a more accurate estimate of the cost function, it requires more extensive data analysis and statistical calculations. The account method and mixed cost method are not relevant for measuring a linear cost function.

One of the Simplest Methods to Measure a Linear Cost