EXERCISE 5-12 (30 MINUTES)

2. - SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH05 COST BEHAIVIOR ANALYSSIS AND USE 2. - SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH05 COST BEHAIVIOR ANALYSSIS AND USE
SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH05 COST BEHAIVIOR ANALYSSIS AND USE
2. As shown in the graph in part (2) of problem 5-17, the high and low points in this case fall in such a way they are not representative of all points of cost data. A regression line drawn through these two points would be too steep and thus result in an inaccurate cost formula. This is the major defect in the high-low method; although it is simple to apply, the manager must be careful in its use or misleading information may result.

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Solutions Manual, Chapter 5

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Problem 5-19 (30 minutes)