Which of the following statements is true with regard to the high-low method? Th
ID: 2569791 • Letter: W
Question
Which of the following statements is true with regard to the high-low method?
The high-low method is a more accurate method compared to the least-squares regression method because all data points are used when calculating the cost formula.
The high-low method calculates a cost formula for fixed costs which is the slope of the line using the highest and lowest data points.
The high-low method is a way to analyze fixed costs based on calculating the slope of a line using all data points.
The cost formula calculated using the high-low method (and, therefore, only two data points) may misrepresent the true cost behavior during normal periods.
The high-low method is a more accurate method compared to the least-squares regression method because all data points are used when calculating the cost formula.
The high-low method calculates a cost formula for fixed costs which is the slope of the line using the highest and lowest data points.
The high-low method is a way to analyze fixed costs based on calculating the slope of a line using all data points.
The cost formula calculated using the high-low method (and, therefore, only two data points) may misrepresent the true cost behavior during normal periods.
Explanation / Answer
The cost formula calculated using the high-low method (and, therefore, only two data points) may misrepresent the true cost behavior during normal periods is correct
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