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

question 2

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.

---

Definitions:

Quarter

A three-month period in a fiscal year used as a basis for financial reporting, planning, and performance assessment.

Present Value

The current value of a future sum of money or stream of cash flows, given a specified rate of return.

Single Amount

Refers to a lump sum payment or financial value not broken down into parts or installments.

Concept

An abstract idea or a general notion that underlies the theoretical framework of a subject or an area of knowledge.