A plot of data that results in one extreme observation MOST likely indicates that:
A)an unusual event such as a plant shutdown occurred during that month.
B)the cost-allocation base has been incorrectly identified.
C)more than one cost pool should be used.
D)individual cost items do not have the same cost driver.

Question

Quizplus · Accepted Answer

One extreme observation in the data indicates an unusual event, such as a plant shutdown during that month. This is because extreme observations are outliers that are not consistent with the rest of the data, and are hence likely to be caused by an unusual event or error rather than a systematic cause like an incorrect cost-allocation base or the need for more than one cost pool.

A Plot of Data That Results in One Extreme Observation