A Major Disadvantage of the Scattergraph Method of Analyzing Cost

question 61

Multiple Choice

A major disadvantage of the scattergraph method of analyzing cost behavior is:

• A)It bases its solution on only two observations.
• 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:

Price

The amount of money required to purchase a good or service, typically determined by supply and demand.

Quantity

The amount or number of a product or service that is available for use or sale.

Technological Advance

Innovations and improvements in technology that increase production efficiency or introduce new goods and services.

Equilibrium Price

The market price where the quantity of goods supplied is equal to the quantity of goods demanded, leading to market stability.