When using the high-low method,the denominator of the equation that determines the slope is the:
A)independent variable.
B)difference between the high and low observations of the dependent variables.
C)dependent variable.
D)difference between the high and low observations of the cost driver.

Question

Quizplus · Accepted Answer

The high-low method is used to separate mixed costs into their fixed and variable components by utilizing the highest and lowest activity levels and costs. The denominator of the equation that determines the slope (i.e. variable cost per unit) is the difference between the high and low observations of the cost driver (i.e. the variable input that causes changes in the cost of production). Therefore, the correct answer is D, which is the difference between the high and low observations of the cost driver.

When Using the High-Low Method,the Denominator of the Equation That