When predicting costs at other volumes using a cost equation derived from either the high-low method or regression analysis,managers should consider:
A)outliers.
B)general inflation.
C)seasonality.
D)all of the above.

Question

Quizplus · Accepted Answer

When predicting costs at other volumes using a cost equation derived from either the high-low method or regression analysis, managers should consider outliers, general inflation, and seasonality.

Outliers are extreme values that may negatively affect the accuracy of the cost equation. Managers should identify and remove any outliers before using the cost equation to predict costs at other volumes.

General inflation refers to the overall increase in the prices of goods and services over time. Managers should take into account the effects of general inflation on costs when using a cost equation to predict costs at other volumes.

Seasonality refers to predictable patterns of demand and cost that change throughout the year. For example, heating costs may be higher in the winter, and sales may be higher during holiday shopping seasons. Managers should consider these seasonal patterns when using a cost equation to predict costs at other volumes.

When Predicting Costs at Other Volumes Using a Cost Equation