Multiple Choice QuestionWhen using the high-low method, the slope represents:Multiple choice question.total fixed coststhe variable cost per unitthe fixed cost per unittotal variable costs
Question
Multiple Choice QuestionWhen using the high-low method, the slope represents:Multiple choice question.total fixed coststhe variable cost per unitthe fixed cost per unittotal variable costs
Solution
The correct answer is: the variable cost per unit.
Here's why:
The high-low method is used in cost accounting to calculate the variable and fixed cost of a product or service. It takes the highest and lowest activity levels and corresponding costs to create a cost formula.
The slope in the high-low method represents the variable cost per unit. This is because the slope is calculated by taking the change in cost (which is affected by the variable cost) and dividing it by the change in activity level.
So, when you're using the high-low method, the slope of the line represents the variable cost per unit.
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