1) When using the high-low method, fixed costs and variable costs appear in the same cost equation.
2) The high-low method uses only two of the historical data points for estimating a cost equation
3) When using the high-low method, the “high” point should be chosen as the data point with the highest volume (not the highest cost).
4) When using the high-low method, the “low” point should be chosen as the data point with the lowest cost (not the lowest volume).
5) Regression analysis uses only two of the historical data points for estimating a cost equation.
6) The data points with the ________ and ________ should be selected for use in the high-low method.
A) highest volume; the lowest volume
B) highest cost; the lowest cost
C) highest volume; the lowest cost
D) highest cost; the lowest volume
7) When using the high-low method, what step is performed first?
A) Find the vertical intercept.
B) Write the cost equation.
C) Find the slope.
D) Predict total cost.
8) When using the high-low method, what is the correct order of the following three steps?
i. Write the cost equation.
ii. Find the vertical intercept.
iii. Find the slope.
A) i, ii, iii
B) ii, iii, i
C) iii, i, ii
D) iii, ii, i
9) When using the high-low method, the variable cost per unit can be found as the:
A) run over rise.
B) rise over run.
C) change in volume over change in cost.
D) vertical intercept.
10) When using the high-low method, what data point can be used to solve for the fixed cost component?
A) The "high" month
B) The "low" month
C) Either the "high" or the "low" month
D) Any month in the data set