A Disadvantage of the High-Low Method of Cost Analysis Is

question 20

Multiple Choice

A disadvantage of the high-low method of cost analysis is that it:

• A) typically results in a totally inaccurate cost formula.
• B) is too time consuming to apply.
• C) uses only two data points, which may not be representative of normal conditions.
• D) relies totally on the judgment of the person performing the cost analysis.

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Definitions:

Probability

The measure of the likelihood that an event will occur, quantified as a number between 0 and 1, with 1 indicating certainty.

Uniform Distribution

An equal likelihood for all outcomes characterizes this probability distribution.

Waiting Time

The duration of time that passes from a specified point until a particular event occurs, often analyzed in queueing theory to improve service processes.

Standardize

The process of adjusting values measured on different scales to a notionally common scale, often used in statistical analysis to compare data points.