The Most Serious Shortcoming of the High-Low Method of Estimating

question 26

Multiple Choice

The most serious shortcoming of the high-low method of estimating a mixed cost function is that it:

• A)Focuses on fixed costs only and ignores variable costs
• B)Usually overestimates the total cost
• C)Is based on a very small portion of the available data
• D)Can only be used if contribution margin income statements are also being used

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Definitions:

Commission

A fee or percentage of a sale paid to an employee or agent for their services in facilitating the sale.

Principals

In a legal context, individuals or entities who authorize agents to act on their behalf in contractual or negotiation situations.

Moneys

Forms of currency, including cash and other mediums of exchange, used as a means to purchase goods and services or settle debts.

Apparent Authority

The appearance or assumption of authority based on the actions of the principal, leading others to believe that an agent has the authority to act.