Weaknesses of the High-Low Method Include All of the Following

question 74

Multiple Choice

Weaknesses of the high-low method include all of the following EXCEPT

• A)only two observations are used to develop the cost function.
• B)the high and low activity levels may not be representative.
• C)the method does not detect if the cost behavior is nonlinear.
• D)the method is relatively complex and difficult to apply.

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Definitions:

Profit-Maximizing Output

The level of production at which a company can achieve the maximum difference between total revenue and total costs, leading to the highest possible profit.

Market Price

The present cost at which a product or service is available for purchase or sale in the market.

Economic Profit

The total revenue of a business minus its explicit and implicit costs; represents additional wealth created by a company over and above its costs.

Total Revenue

The overall amount of money generated from the sale of goods or services.