Question

Which of the following is false about the high-low method ?

a. it is based on only two data points.
b. it yields an equation for straight line connecting the high and low date points
c. selection of the high and low data points should be based on cost, not volume
d. the slope found from the method represents the variable cost per unit

Answer 1

The high-low method does not yield an equation for a straight line connecting the high and low data points.

Step-by-step explanation:

The false statement about the high-low method is option b. The high-low method does not yield an equation for a straight line connecting the high and low data points.

The high-low method is a cost estimation technique that uses two data points, the highest and lowest levels of activity, to estimate the fixed and variable costs. It assumes the variable cost per unit is constant across all levels of activity. By calculating the difference in costs and activity levels between the two data points, the variable cost per unit can be determined.