Question

1) Which of the following is an advantage of the high-low method?

            a)      It enables the analysis to determine whether or not the data points are linear.

            b)      It is quick and easy to apply.

            c)      It eliminates most of the data points.

            d)      All data points are used in the analysis.

2) Discretionary fixed costs:

            a)        vary directly and proportionately with the level of activity.

            b)        have a long-term planning horizon, generally encompassing many years.

            c)        are made up of plant, equipment, and basic organizational costs.

            d)        usually arise from annual decisions by management.

3) Which of the following is not a variable cost of producing sweatshirts?

            a)        Electricity cost of $0.25 per Kilowatt/hour to run sewing machines in a factory.

            b)        Janitorial cost of $2,000 per month.

            c)        Cost of thread.

            d)        Wages of production workers.

4) In a scattergraph, the line fitted to the plotted points is known as a regression line. True/False

5) The scattergraph method yields cost estimates that are the most precise possible. True/False

Answer 1

Answers :

1. Option B (It is quick and easy to apply.)

One of the advantage of high low method is it is quick and easy to apply.

2. Option D ( Discretionary fixed costs usually arise from annual decisions by management.)

3. Option B ( Janitorial cost of $2,000 per month.)

4. True, yes the given statement is true i.e., In a scattergraph, the line fitted to the plotted points is known as a regression line.

5. False, the given statement is false because, actual costs incurred in future periods might vary from the scattergraph method cost estimates The method is also not useful when there is little correlation between the costs incurred and the related activity level because projecting costs into the future is difficult.

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