A method that estimates cost behavior by using just the highest and lowest volume levels is called the:
A)Scatter method.
B)High-low method.
C)Least-squares method.
D)Break-even method.
E)Step-wise method.

Question

Quizplus · Accepted Answer

The high-low method is the method that estimates cost behavior by using just the highest and lowest volume levels. This method takes the difference in total costs between the highest and lowest activity levels and divides it by the difference in activity levels. By doing so, it determines the variable cost per unit of activity and the fixed cost component of the total cost. Therefore, the best choice is B.

A Method That Estimates Cost Behavior by Using Just the Highest