A method that estimates cost behavior by connecting the costs linked to the highest and lowest volume levels on a scatter diagram with a straight line is called the:
A) Scatter method.
B) High-low method.
C) Least-squares method.
D) Break-even method.
E) Step-wise method.

Question

Quizplus · Accepted Answer

The method described is the high-low method. It involves identifying the highest and lowest volume levels and then using those data points to estimate the intercept and slope of a straight line equation. This method is simple and quick but can result in less accurate estimates compared to other methods such as the least-squares method.

A Method That Estimates Cost Behavior by Connecting the Costs