A Major Disadvantage of the High-Low Method of Analyzing Cost

question 21

Multiple Choice

A major disadvantage of the high-low method of analyzing cost behavior is:

• A)It bases its solution on only two possibly extreme observations,rather than all of the data points.
• B)It results in its analyzed cost being treated as either fixed or variable,based on which type of behavior it more closely resembles.
• C)Two persons could draw different lines through the data points.
• D)It enables non-representative points,called outliers,to be identified.

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Definitions:

Outlier

An outlier is a data point that is significantly different from the others in a dataset, often lying far outside the range of the majority of the data.

Box and Whisker Plot

A graphical representation of data that shows the distribution's median, quartiles, and outliers.

Symmetric

Equally balanced or identical in size or shape on both sides of a dividing line.

Variation

The measure of how data points in a data set differ from the mean value of the data set.