The High-Low Method Involves Choosing the Period of Highest Cost

question 168

True/False

The high-low method involves choosing the period of highest cost driver activity and the period of lowest cost driver activity.

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Definitions:

Variable Overhead

Costs that vary with the level of production or business activity, such as utilities and indirect materials, but do not directly correlate to direct labor or materials.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead costs incurred and the expected (or standard) costs, based on efficient usage of resources.

Actual Labour Hours

The real amount of labor time spent by employees on the production of goods or provision of services.

Standard Labour Rate

The pre-determined cost per unit of labor time, used in calculating labor expenses in manufacturing.