A major disadvantage of the scattergraph method of analyzing cost behavior is:
A)It bases its solution on only two observations.
B)It results in its analyzed cost being treated as either fixed or variable,based on which type of behavior it more closely resembles.
C)Two persons could draw different lines through the data points.
D)It enables non-representative points,called outliers,to be identified.

Question

Quizplus · Accepted Answer

The scattergraph method involves plotting historical cost data on a graph and drawing a line that best fits the data points. Since this process involves judgment, two individuals might draw different lines through the data points, leading to different conclusions about cost behavior.

A Major Disadvantage of the Scattergraph Method of Analyzing Cost