Multiple Choice
In cost-volume-profit (CVP) analysis, which of the following factors are primarily analyzed to predict how changes affect net income?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
Multiple Choice
Which of the following is a statistical method used for identifying cost behavior in accounting?
A
Weighted average method
B
High-low method
C
Specific identification method
D
First-in, first-out (FIFO) method
Verified step by step guidance1
Understand the concept of cost behavior: Cost behavior refers to how costs change in response to changes in activity levels. Identifying cost behavior is crucial for budgeting and decision-making in accounting.
Learn about the high-low method: The high-low method is a statistical technique used to estimate fixed and variable costs by analyzing the highest and lowest levels of activity and their corresponding costs.
Compare the options provided: Weighted average method, specific identification method, and FIFO method are not statistical methods for identifying cost behavior. They are used for inventory valuation and cost allocation purposes.
Focus on the high-low method: This method uses the formula for variable cost per unit: \( \text{Variable Cost per Unit} = \frac{\text{Cost at High Activity Level} - \text{Cost at Low Activity Level}}{\text{High Activity Level} - \text{Low Activity Level}} \). Fixed costs can then be determined by subtracting the total variable cost from the total cost at either activity level.
Conclude that the high-low method is the correct statistical method for identifying cost behavior in accounting, as it specifically analyzes cost changes relative to activity levels.
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