The High-Low Method

question 99

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)gives accurate results of cost estimation,irrespective of the relevant range.
• C)helps in determining the fixed and variable components of a mixed cost.
• D)is based on the premise that all data points are necessary to define a linear cost-volume relationship.

---

Definitions:

Administrative Expenses

Overhead or general expenses related to the day-to-day operations of a business that are not directly tied to a specific project.

Fixed Manufacturing Overhead

The consistent, non-variable costs associated with manufacturing products, such as salaries and rent for factory premises.

Direct Labor Costs

Costs that are directly associated with the production of goods, such as wages paid to manufacturing staff.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead to individual jobs or products based on a specific activity base.