A Limitation of Using the Scattergraph Method to Estimate the Cost

question 32

Multiple Choice

A limitation of using the scattergraph method to estimate the cost components of total cost is

• A)the scattergraph method is complex and costly to use.
• B)the scattergraph method requires the use of statistical software.
• C)the scattergraph method is not an accepted method for many companies.
• D)the choice of the line used to estimate the cost components is subjective.

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Definitions:

Equity Method

An accounting technique used by a company to record its investment in another company when it has significant influence but not full control.

Consolidated Financial Statements

Financial statements that present the assets, liabilities, equity, income, expenses, and cash flows of a parent company and its subsidiaries as one single entity.

Consolidated Sales

The total sales of a parent company and its subsidiaries, after eliminating intercompany sales, presented as a single sales figure for the entire company group.