Which of the following statements about a scattergraph is correct?
it is the most accurate way of estimating the variable and fixed elements of a fixed cost
it is an effective way of determining if the cost behaviour is linear
it will always yield the same results as the high-low method
provides only one correct cost formula in the form of Y=a+bx
Scattergraph is not accurate to estimate variable and fixed element of fixed costs. Scattergraph results could differ from that of high-low method as both provides different results. Scattergraph could have more than one correct cost formula depending on relationship between costs and its data points. Scattergraph is effective in order to determine if cost behaviour has linear relationship.
Thus, statement (1), (3) and (4) is incorrect and option (2) is correct.
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