The High-Low Method

question 65

Multiple Choice

The high-low method

• A) calculates variable costs per unit by dividing the difference in the high and low activity levels by the high and low costs.
• B) assumes that the fixed portion of the mixed cost is the lowest monthly cost incurred during the period under consideration.
• C) allows differentiation between fixed and variable costs when dealing with mixed costs.
• D) combines the fixed and variable portions of a cost to determine the total cost.

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Definitions:

Nominal Interest Rate

The rate of interest before adjustments for inflation, indicating the face value of interest payments.

Real GDP

A country's economic production measure that accounts for fluctuations in prices due to inflation or deflation, indicating the true volume of goods and services created.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision or selection among multiple options.

Money Supply

The total amount of monetary assets available in an economy at a specific time, including cash, bank deposits, and liquid assets.