A Significant Weakness of the High-Low Method Is That

question 160

Multiple Choice

A significant weakness of the high-low method is that

• A)a significant amount of management expertise is necessary to break out the variable and fixed costs.
• B)the two data points that are used may not be representative of the general relationship between cost and activity.
• C)the calculations are so complex that a computer is usually necessary in order to get accurate results.
• D)monthly data must be collected for at least three years before the method can be used.

---

Definitions:

Buying and Selling Merchandise

The process of purchasing goods to resell at a higher price, typically found in retail or wholesale businesses.

Revenue Recognition Rules

guidelines that determine when and how revenue is recognized and recorded in the financial statements.

Sales Discounts

Reductions in the amount owed by a customer, usually offered as an incentive for early payment.

Single-Step Income Statement

A simplified income statement that calculates net income by subtracting total expenses from total revenues with a single calculation.