Why might a manager prefer the regression analysis method over the high-low meth

Question

Why might a manager prefer the regression analysis method over the high-low method? O A. The regression line is more representative of a relationship between the cost drivers and the dependent variable (cost) because the method uses all observations to estimate the relationship ?B. Regression analysis s widely used because it helps managers get behind the numbers to understand why costs behave he way hey do, the factors hat dr e costs, and what managers can do to influence hem. OC. The high-low method fits a line through the data based only on the highest and lowest values of the cost driver. It therefore ignores all other data points. Regression analysis finds the line of best fit based on all data points ? D. All of the above

Explanation / Answer

(D) All of these.

Regression analysis involves two types of variables : (a) dependent variable (cost to be estimated) and (b) independent variable (cost driver used to estimate the line). It takes into account all the observation to determine the regression line which is used to estimate the cost. Whereas in high low method selects only two observations to detemine the line. The two observations being the highest and the lowest. As a result, regression analysis is a more better tool to estimate the value as compared to high low method.

Since all the three points covers these description of regression analysis and high low method, the answer all of these is selected.

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