Which of the following is false about the high-low method?


Which of the following is false about the high-low method? A. The slope found from the method represents the variable cost pe
Assume 300 units were completed and transferred out during the period. The 180 units left in ending WIP are 10% complete with

Answer

Option (D) Selection of the high and low data points should be based on cost, not volume.

  • The slope represents the variable cost per unit.
  • It is based on two data points, high and low.
  • As the two points, high and low are taken to determine the cost at all volumes, it will yield a straight line depicting the constant variable cost connecting the high and low points.
  • The high and low points should be based on volume because the volume is the cost driver and the base of cost.

Option (D) 318
Equivalent units
= 300 (180*10%)
= 300+18
= 318

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