Answer (C) is correct . The fixed and variable portions of mixed costs may be estimated by identifying the highest and the lowest costs within the relevant range. The difference in cost divided by the difference in activity is the variable rate. Once the variable rate is found, the fixed portion is determinable. The high-low method is a simple approximation of the mixed cost formula. The costs of using more sophisticated methods sometimes outweigh the incremental accuracy achieved. In these cases, the high-low method is sufficient.
Answer (A) is incorrect because The least squares method is a sophisticated method of identifying the fixed and variable costs.
Answer (B) is incorrect because A computer simulation is a more exact method of separating fixed and variable costs.
Answer (D) is incorrect because Matrix algebra is a precise method of separating fixed and variable costs.
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