Question Details

The high-low method relies on only two observations



1) Two common forms of quantitative analysis methods of cost estimation are the high-low method and regression analysis. 


2) The high-low method relies on only two observations, the highest and lowest, to estimate a linear cost function. 

3) The dependent variable is a cost to be predicted and managed, whereas an independent variable or cost driver is the factor used to predict the dependent variable.

4) The vertical difference, called the residual term, measures the distance between actual cost and estimated cost for each observation of the cost driver.

5) The high-low method is more accurate than the regression method of estimating a cost function. 




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