Managerial Accounting
3rd Edition
ISBN: 9780077826482
Author: Stacey M Whitecotton Associate Professor, Robert Libby, Fred Phillips Associate Professor
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 5, Problem 12E
Comparing High-Low Method and Least-Squares Regression Results
Consider Camp Rainbow’s Cost estimated in E5- 10 using the high-low method and in E5-11 using regression. The two methods yielded very different results, especially in their estimates of fixed cost.
1. Describe the differences in the cost estimates generated by these two methods.
2. Explain why you believe the differences exist.
3. Explain which method is more reliable and why.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Which of the following methods of cost estimation relies on only two data points?A. the high-low methodB. account analysisC. least-squares regressionD. SWOT analysis.
Explain why cost predictions based on the same cost driver can differ when applying the high-low method and regression analysis. State one advantage and one disadvantage of the high-low method.
Which of the following statements related to cost estimation methods is false? The least-squares regression method is the most accurate and reliable method to determine the cost behavior compared to scatter-graph plot and high-low methods. O b. The low-high method is used to derive an estimated line of cost behavior by graphically connecting the two cost amounts identified with the highest and lowest volume levels. The three methods determine a slope and an intercept. O d. None of the given answers. The most complex method of cost estimation is the high-low method.
Chapter 5 Solutions
Managerial Accounting
Ch. 5 - Define each of the following terms variable cost,...Ch. 5 - Prob. 2QCh. 5 - Prob. 3QCh. 5 - Prob. 4QCh. 5 - Prob. 5QCh. 5 - Describe the three methods used to estimate cost...Ch. 5 - Prob. 7QCh. 5 - Prob. 8QCh. 5 - Prob. 9QCh. 5 - Prob. 10Q
Ch. 5 - Prob. 11QCh. 5 - Prob. 12QCh. 5 - Prob. 13QCh. 5 - Prob. 14QCh. 5 - Which of the following increases when activity...Ch. 5 - Prob. 2MCCh. 5 - Prob. 3MCCh. 5 - Consider the following information for a local...Ch. 5 - Prob. 5MCCh. 5 - Prob. 6MCCh. 5 - Prob. 7MCCh. 5 - Prob. 8MCCh. 5 - Prob. 9MCCh. 5 - Hathaway Corp, manufactures garden hoses. Last...Ch. 5 - Identifying Cost Behavior Heather Oak is trying to...Ch. 5 - Prob. 2MECh. 5 - Defining Cost Behavior Match each of the following...Ch. 5 - Prob. 4MECh. 5 - Defining Terms for the High-Low Method Indicate...Ch. 5 - Prob. 6MECh. 5 - Prob. 7MECh. 5 - Prob. 8MECh. 5 - Prob. 9MECh. 5 - Prob. 10MECh. 5 - Prob. 11MECh. 5 - Prob. 12MECh. 5 - Prob. 13MECh. 5 - Prob. 14MECh. 5 - Prob. 15MECh. 5 - Prob. 16MECh. 5 - Compare full absorption costing to variable...Ch. 5 - Identifying Cost Behavior Patterns Steve...Ch. 5 - Prob. 2ECh. 5 - Prob. 3ECh. 5 - Prob. 4ECh. 5 - Estimating Cost Behavior Using High-Low Method...Ch. 5 - Prob. 6ECh. 5 - Prob. 7ECh. 5 - Prob. 8ECh. 5 - Prob. 9ECh. 5 - Estimating Cost Behavior Using Scattergraph and...Ch. 5 - Estimating Cost Behavior Using Least-Squares...Ch. 5 - Comparing High-Low Method and Least-Squares...Ch. 5 - Preparing Contribution Margin Income Statement...Ch. 5 - Determining Cost Behavior, Preparing Contribution...Ch. 5 - Prob. 15ECh. 5 - Prob. 16ECh. 5 - Prob. 17ECh. 5 - Prob. 18ECh. 5 - Comparing Full Absorption Costing and Variable...Ch. 5 - Estimating Cost Behavior Using Least-Squares...Ch. 5 - Prob. 1.1GAPCh. 5 - Prob. 1.2GAPCh. 5 - Prob. 1.3GAPCh. 5 - Prob. 1.4GAPCh. 5 - Prob. 1.5GAPCh. 5 - Prob. 1.6GAPCh. 5 - Prob. 2.1GAPCh. 5 - Prob. 2.2GAPCh. 5 - Prob. 2.3GAPCh. 5 - Prob. 2.4GAPCh. 5 - Prob. 2.5GAPCh. 5 - Prob. 2.6GAPCh. 5 - Prob. 2.7GAPCh. 5 - Prob. 3.1GAPCh. 5 - Prob. 3.2GAPCh. 5 - Prob. 3.3GAPCh. 5 - Prob. 3.4GAPCh. 5 - Prob. 3.5GAPCh. 5 - Prob. 4.1GAPCh. 5 - Prob. 4.2GAPCh. 5 - Prob. 4.3GAPCh. 5 - Comparing Full Absorption and Variable Costing...Ch. 5 - Comparing Full Absorption and Variable Costing...Ch. 5 - Prob. 5.3GAPCh. 5 - Prob. 6.1GAPCh. 5 - Prob. 6.2GAPCh. 5 - Prob. 6.3GAPCh. 5 - Prob. 6.4GAPCh. 5 - Prob. 6.5GAPCh. 5 - Prob. 6.6GAPCh. 5 - Prob. 1.1GBPCh. 5 - Prob. 1.2GBPCh. 5 - Prob. 1.3GBPCh. 5 - Prob. 1.4GBPCh. 5 - Estimating Cost Behavior Using Scattergraph,...Ch. 5 - Prob. 1.6GBPCh. 5 - Prob. 2.1GBPCh. 5 - Estimating Cost Behavior Using Scattergraph,...Ch. 5 - Prob. 2.3GBPCh. 5 - Prob. 2.4GBPCh. 5 - Prob. 2.5GBPCh. 5 - Prob. 2.6GBPCh. 5 - Prob. 2.7GBPCh. 5 - Prob. 3.1GBPCh. 5 - Prob. 3.2GBPCh. 5 - Prob. 3.3GBPCh. 5 - Prob. 3.4GBPCh. 5 - Prob. 3.5GBPCh. 5 - Prob. 4.1GBPCh. 5 - Prob. 4.2GBPCh. 5 - Prob. 4.3GBPCh. 5 - Prob. 5.1GBPCh. 5 - Prob. 5.2GBPCh. 5 - Prob. 5.3GBPCh. 5 - Prob. 6.1GBPCh. 5 - Prob. 6.2GBPCh. 5 - Prob. 6.3GBPCh. 5 - Prob. 6.4GBPCh. 5 - Prob. 6.5GBPCh. 5 - Prob. 6.6GBP
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- High-low and regression cost estimation methods are alike in that they both: Select one: O a. Have a slope term but not an intercept term. O b. Provide the same accuracy and reliability O c. Have an intercept term but not a slope term. O d. Have an intercept term and a slope term.arrow_forwardWhich of the following statements about Least Squares Regression is not true ? Least -squares regression is a mathematical technique to fit a cost -estimating equation to observed data . In least -squares regression , a statistical measure (R -squared ) can be used to determine how well the equation fits the data . Least -squares regression is considered superior to the high -low method because it uses more data points than just the high and low points None of the listed choices are the correct answer because all of the listed choices are true . Least -squares regression maximizes the vertical squared difference between the estimated and actual costs at each data point .arrow_forwardWhich of the following is NOT true of regression techniques for estimating costs? a) They permit the inclusion of more than one predictor. b) They typically use the highest and lowest activity points to estimate the relation between cost and activity. c) They help develop estimates that have a broader base than those based on a few select points. d) They are designed to generate a line that best fits a set of data points.arrow_forward
- An easy way to estimate the variable and fixed costs components of a mixed cost is by: 1. a scatter plot 2. the high-low method 3. a regression analysis 4. a guesstimatearrow_forwardLeast-squares regression is a statistical method for identifying cost behavior. True or False Truearrow_forward7. Which of the following charts best represent total variable costs? For each chart, the line represents the cost behavior pattern, the vertical axis represents costs, and the horizontal axis represents total volume, (A) Your answer is (B) (C) (D) Explain your answer: 8. Which of the following is NOT a cost estimation method? A) High-low cost estimation B) Scatter diagrams C) Least-square regressions D) CVP analysis Your answer is Explain your answer: 9. Assume a local Cost Cutters provides cuts, perms, and hairstyling services. Annual fixed costs are $120,000, and variable costs are 40 percent of sales revenue. Determine its break-even point in sales dollars. A) $250,000 B) $200,000 c) $240,000 D) $360,000 Your answer is Explain your answer:arrow_forward
- Obtaining regression estimates for cost estimation requires establishing the existence of a logical relation between activities and the cost to be estimated. Which of the following is not used to refer to these activities? Multiple Choice predictors. dependent variables. X terms. independent variables.arrow_forward(a) High-Low method uses only two data points which may not produce accurate results. (b) Least-squares Regression method is a statistical technique that uses all of the observations of cost data . a. Only statement A is true b. Only statement B is false c. Both statements are false d. Both statements are truearrow_forwardDirections: Choose the right answer in the multiple-choice 1. What is the cost incurred in the past? A. Future cost B. Unknown cost C. Already incurred cost D. Accounting Cost E. None of the above 2. The formula: Y=a+bx+cz is an example ofA. Simple regressionB. Multiple regressionC. Linear programmingD. None of the above 3. If “r” between two variables is zero, how might the scatter diagram of these variables appear?A. A least-square line that slopes to the rightB. A least-square line that slopes to the leftC. Under this case, the scatter diagram could not be plotted in the graphD. None of the above 4. In cost accounting, relevant range is the range over which A. Production is stableB. Costs are stable and constantC. Total fixed cost fluctuatesD. Cost relationship Is not validE. None of the above 5. Which of the following is a controller’s responsibility? A. Provision for capitalB. Custodian of fundsC. Credit and collectionD. Arranging shirt…arrow_forward
- _____Identifying the relationship between the activity and the costs is a key step in which of the following cost estimation methods? a) Scattergraph. b) High-low method. c) Linear regression. d) Account analysis.arrow_forwardSimple regression analysis provides the means to evaluate a line of regression, which is fitted to a plot of data and represents the a. way costs change with respect to dependent variable.b. way costs change with respect to both independent and dependent variables.c. variability expense with pesos of productiond. way costs change with respect to independent variable.arrow_forwardR-squared is a measure of a. The spurious relationship between cost and activity b. The fxed cost component C The variable cost per unit activity d. How well the regression line accounts for the changes in the dependent variablearrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Excel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage Learning
Principles of Cost Accounting
Accounting
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Excel Applications for Accounting Principles
Accounting
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Cengage Learning
How to Estimate Project Costs: A Method for Cost Estimation; Author: Online PM Courses - Mike Clayton;https://www.youtube.com/watch?v=YQ2Wi3Jh3X0;License: Standard Youtube License