A Limitation of the High-Low Method Is That

question 141

Multiple Choice

A limitation of the high-low method is that

• A)it is costly to use because it uses a statistical technique to estimate the cost components.
• B)it is complex to calculate.
• C)it can only be used if the levels of activity cover a wide range.
• D)because it is based on only two extreme points, the high and low activity levels, the cost equation may not be truly representative of the cost relationship.

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Definitions:

Performance Data

Information and statistics collected about the operations of a system or the activities of individuals and organizations to evaluate effectiveness or efficiency.

Aggregate

A whole formed by combining several separate elements; often used in the context of data or materials.

Efficiency Metrics

Quantitative tools used to assess the productivity and performance of a system or process, focusing on maximizing outputs with minimal inputs.

Total Cost

The complete amount of money required to produce goods or services, including fixed and variable costs.