What is the high low method quizlet?
high-low method is a method of separating mixed costs into fixed and variable components by using just the high and low data points. high point cost- low point cost/ high point output- low point output. high and low points are identified by looking at the activity levels and not the costs.
What is the first step in the high low method?
High-low method example
- Step 1: Identify the highest and lowest activity level.
- Step 2: Calculate the variable cost per unit.
- Step 3: Calculate the fixed cost.
- Step 4: Calculate the total variable cost for the new activity.
- Step 5: Calculate the total cost.
Which of the following is a disadvantage of the high low method quizlet?
A potential disadvantage of the high-low method is that: it uses only two data points, which may not be representative of normal conditions. Which of the following is a true statement about the least squares regression method?
Which of the following is an advantage of high low method?
One advantage of the high-low method is the lack of formality required. The accountant can analyze these numbers using data from the monthly expenses and the activity level. He does not need to contact anyone outside of the company to determine the fixed expenses or the variable rate per unit.
When using the high low method the change in cost divided by the change units is?
The high-low method computes the variable cost rate by dividing the change in the total costs by the change in the number of units of manufactured. In other words, the $4,800 change in total costs is divided by the change in units of 300 to yield the variable cost rate of $16 per unit of product.
When using the high low method if the high or low levels of cost do not match the high or low levels of activity?
Company presidents salary, sales commissions. When using the high-low method, if the high or low levels of cost do not match the high or low levels of activity: choose the periods with the highest and lowest level of activity and their associated costs.
What is a high-low method?
In cost accounting, the high-low method is a way of attempting to separate out fixed and variable costs given a limited amount of data. The high-low method involves taking the highest level of activity and the lowest level of activity and comparing the total costs at each level.
What is high-low method formula?
To solve this using the high-low method formula, subtract the lower cost from the higher cost to get a numerator of $27,675, then subtract the lowest number of units from the highest quantity to get a denominator of 22,500 units. Divide the numerator by the denominator to get an estimated cost of $1.23 per unit.
Which of the following is the best example of a variable expense?
Examples of variable costs are sales commissions, direct labor costs, cost of raw materials used in production, and utility costs.
What does the coefficient of determination r tell you quizlet?
What does the Coefficient of Determination tell us? It tells us the percentage of total variation in the dependent variable that is explained by the independent variable. For example, an R2 value of 0.63 indicates that the variation of the ind variable (X) explains 63% of the variation in the dep variable (Y).
Why is the high low method criticized?
Cost behavior outside of the relevant range is not linear, which distorts CVP analysis. Some period costs are variable costs, and some period costs are fixed costs. The high-low method is criticized because it. ignores levels of activity other than the high and low points.
Why is regression analysis better than high low method?
Regression analysis is more accurate than the high-low method because the regression equation estimates costs using information from ALL observations whereas the high-low method uses only TWO observations. estimates the relationship between the dependent variable and TWO OR MORE independent variables.