Weaknesses of the High-Low Method Include All of the Following

question 53

Multiple Choice

Weaknesses of the high-low method include all of the following EXCEPT

• A)only two observations are used to develop the cost function.
• B)the high and low activity levels may not be representative.
• C)the method does not detect if the cost behaviour is nonlinear.
• D)the method is relatively complex and difficult to apply.

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Definitions:

CCA Rate

Stands for Capital Cost Allowance rate, which is the rate at which a business can claim depreciation on capital assets for tax purposes in Canada.

UCC

An abbreviation for the Uniform Commercial Code, a set of laws governing sales and commercial transactions in the United States.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, representing how much of the asset's value has been used up during the period.

Net Capital Spending

The total expenditure on fixed assets less any sales of fixed assets.