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:

Fair Value

The estimated market value of an asset or liability, reflecting the amount for which it could be exchanged in an orderly transaction between knowledgeable, willing parties.

Total Cost

The complete cost of producing or acquiring goods or services, including direct costs, indirect costs, and overheads.

Trading Securities

Financial assets held by a firm for the purpose of short-term gain and which can be sold in the public market.

Fair Value

The price that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.