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why is regression analysis is considered the most superior method of estimating cost behavior

why is regression analysis is considered the most superior method of estimating cost behavior

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The 'high-low' method assumes perfect linear relationship between the activity level and the total amount of mixed cost, which is not the case. Further, the method considers only two levels of activity and disregards other activity levels that occurred, assuming that the linear relationship exists at any activity level.

The regression analysis, on the other hand, constructs a line between the points of total-cost plotted on a graph, such that the sum of the squared deviations of the various points plotted from the line, is the minimum. It is a statistical tool and provides best results on an average. As it is a statistical measure, it is amenable to statistical analysis.

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