Asked by Kevin Huynh on Jun 20, 2024
Verified
The high-low method is generally less accurate than the least-squares regression method
for analyzing the behaviour of mixed costs.
High-Low Method
An accounting technique used to estimate the fixed and variable components of a cost based on the highest and lowest activity levels.
Least-Squares Regression
A statistical method used to determine the line of best fit by minimizing the sum of the squares of the vertical distances of the points from the line.
- Comprehend and employ various techniques (scattergraph, high-low, least-squares regression) for cost estimation.
- Acquire knowledge on the use and restrictions of the high-low method for cost prediction.
Verified Answer
KP
Kheysha PerezJun 26, 2024
Final Answer :
True
Explanation :
The high-low method is relatively simple and fast to use, but it relies on only two data points (the highest and lowest), which may not be representative of the entire data set. On the other hand, the least-squares regression method considers all data points and calculates a more accurate estimate of the fixed and variable components of a mixed cost.
Learning Objectives
- Comprehend and employ various techniques (scattergraph, high-low, least-squares regression) for cost estimation.
- Acquire knowledge on the use and restrictions of the high-low method for cost prediction.
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