Post 1 - estimate variable costs. Advantages of the...

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Pease respond to these Threaded Discussion Questions from the "Questions" section at the end of Chapter 3. Take time to review the responses of your classmates and provide your feedback. 1. Question 2 on page 93 The high–low method of analyzing mixed costs uses only two observation points: the high and the low points of activity. Are these always the best points for prediction purposes? Why or why not? Hi Professor and class, The high-low method divides the change in costs for the highest and lowest levels of activity by the change in units for the highest and lowest levels of activity to
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Unformatted text preview: estimate variable costs. Advantages of the high-low method are that any two people using a particular set of data will come up with the same answer. The high low method gives quick estimation. Only two points of data are needed. The disadvantages of the high-low method are that the high and low points may not be representative of the cost-activity relationship. High and low points can be outliers and may represent atypical cost-activity relationships. Even if these points are not outliers, other pairs of points may clearly be more representative. Jack...
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This note was uploaded on 07/16/2011 for the course COST ACCOU 410 taught by Professor David during the Fall '10 term at Kaplan University.

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