Managerial Accounting (15th Edition)

Published by McGraw-Hill Education
ISBN 10: 007802563X
ISBN 13: 978-0-07802-563-1

Chapter 2 - Managerial Accounting and Cost Concepts - Questions - Page 51: 2-11

Answer

The major disadvantage of this method is represented by the fact that in order to find out the cost formula, it uses only two singular points.

Work Step by Step

In mathematics, when we refer to two points, we most likely refer to the extremes. In this case, this means the highest level of the activity compared to the lowest level of the activity. Nothing in the middle of those two parameters are taken into consideration, which means that the result will not be very representative; it will be more useful only as a form of orientation.
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