[amp_mcq option1=”low high method” option2=”constant equation” option3=”variable equation” option4=”high low method” correct=”option4″]<\/p>\n
The correct answer is D. high low method.<\/p>\n
The high-low method is a simple method of estimating the variable cost per unit and the fixed cost component of a mixed cost. It does this by using the highest and lowest values of the cost driver and the corresponding costs.<\/p>\n
The high-low method is based on the assumption that the cost behavior is linear within the relevant range. This means that the cost changes in direct proportion to changes in the cost driver.<\/p>\n
To use the high-low method, you first need to identify the highest and lowest values of the cost driver and the corresponding costs. Once you have this information, you can calculate the variable cost per unit and the fixed cost component as follows:<\/p>\n
Variable cost per unit = (Highest cost – Lowest cost) \/ (Highest activity level – Lowest activity level)<\/p>\n
Fixed cost = Highest cost – (Variable cost per unit * Highest activity level)<\/p>\n
For example, let’s say that you have the following data for a particular cost:<\/p>\n
Activity level (units) | Cost
\n——- | ——–
\n100 | 1000
\n200 | 1500<\/p>\n
The high-low method would calculate the variable cost per unit and the fixed cost as follows:<\/p>\n
Variable cost per unit = (1500 – 1000) \/ (200 – 100) = 25
\nFixed cost = 1500 – (25 * 200) = 250<\/p>\n
The high-low method is a simple and easy-to-use method of estimating the variable cost per unit and the fixed cost component of a mixed cost. However, it is important to note that the high-low method is only accurate if the cost behavior is linear within the relevant range. If the cost behavior is not linear, then the high-low method will not provide accurate estimates of the variable cost per unit and the fixed cost component.<\/p>\n","protected":false},"excerpt":{"rendered":"
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