Estimation of cost functions of an ignoring information from all points, but considering two observation points, can be classified as _________?
Correct answer: B. disadvantage of high low method
- A. disadvantage of low high method
- B. disadvantage of high low method
- C. advantage of high low method
- D. advantage of low high method
Explanation
The high-low method estimates a cost function using only the highest and lowest activity observations, ignoring all other data points. This makes the estimate vulnerable to unusual or unrepresentative observations.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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