The Method of Analyzing Cost Behavior That Uses Two Data

question 67

Multiple Choice

The method of analyzing cost behavior that uses two data points to first determine the variable cost per unit and then the total fixed cost is the:

• A)Method of least squares.
• B)Scattergraph method.
• C)High-low method.
• D)Observation method.

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Definitions:

Pledging Receivables

Pledging receivables involves using the money owed to a company by its customers as collateral for a loan.

Effective Cost

Effective cost refers to the total cost of a financing option when all charges, fees, and interest payments are taken into account.

Annual Rate

The interest rate for a period of one year, often used to compare the yields of different investment and financing options.

ABC System

A system of controlling inventory that recognizes the differing cost and importance of various items. A parts are expensive and/or important and are controlled carefully. C parts are cheap and plentiful, so little effort is expended to monitor them. B parts are between As and Cs.