When the High-Low Method of Estimating a Cost Behavior Pattern

question 16

Multiple Choice

When the high-low method of estimating a cost behavior pattern is used:

• A)cost and volume data must be reviewed for outliers.
• B)the direct result of the high-low calculations is the fixed expense amount.
• C)the highest and lowest sales price and volume amounts are used in the calculation.
• D)the resulting cost formula will explain total cost accurately for every value between the high and low volumes.

---

Definitions:

AGI

Adjusted Gross Income, calculated by taking gross income and subtracting specific deductions, determining eligibility for many tax credits and deductions.

Deductibility

Deductibility pertains to the eligibility of an expense to be subtracted from gross income to lower taxable income, based on tax laws and regulations.

Medical Expenses

Costs for healthcare services that are paid out-of-pocket by an individual or covered by insurance.

Casualty Loss

A loss resulting from a sudden, unexpected, or unusual event such as a storm, theft, or car accident, which can potentially be deducted from one's taxes.