Question Details

The high-low method


1) When using the high-low method, the two observations used are the high and low observations of the ________.
A) cost driver 
B) fixed cost component
C) slope coefficient 
D) direct cost 


2) When using the high-low method, the numerator of the equation that determines the slope is the ________. 
A) difference between the positive and negative values of dependent and independent variables 
B) difference between the fixed cost and variable cost associated with the cost driver
C) difference between the high and low observations of the cost driver 
D) difference between the costs associated with highest and lowest observations of the cost driver 


3) The high-low method ________.
A) measures the difference between actual cost and estimated cost for each observation of the cost driver
B) calculates the standard deviation of residuals
C) calculates the slope coefficient using only two observed values within the relevant range and their respective costs
D) measures how well the predicted values, y, based on the cost driver, X, match actual cost observations, Y

4) Put the following steps in order for using the high-low method of estimating a cost function:

	A = Identify the cost function
	B = Calculate the constant
	C = Calculate the slope coefficient
	D = Identify the highest and lowest observed values 

A) D C A B 
B) C D A B 
C) A D C B 
D) D C B A 

5) Regression analysis ________.
A) calculates the slope coefficient using only two observed values within the relevant range and their respective costs
B) measures the average amount of change in the dependent variable associated with a unit change in one or more independent variables
C) estimates the cost functions using the time-and-motion studies
D) measures the variability or dispersion in a set of data points




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