Which of the Following Is NOT a Weakness of the High-Low

question 80

Multiple Choice

Which of the following is NOT a weakness of the high-low method?

• 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:

Contribution Margin

The difference between the sales revenue of a product and its variable costs, used to cover fixed costs and contribute to profit.

Variable Costing

An accounting method that only assigns variable costs to inventory, treating fixed costs as expenses in the period they are incurred.

Variable Costing

An accounting practice that only factors in variable production expenses (like direct materials, direct labor, and variable manufacturing overhead) into the cost of goods.

Unit Product Cost

The total cost (including materials, labor, and overhead) divided by the number of units produced, representing the cost to produce a single unit of product.