Which of the following is NOT one of the three primary methods used to classify costs into their fixed and variable components?

• A. Scattergraph method
• B. High-low method
• C. Account analysis method
• D. Weighted-average method

Answer: (D)

Verified step by step guidance

1. Understand the concept of cost classification: Fixed costs remain constant regardless of activity level, while variable costs change with activity level. Methods to classify costs help in separating these components.
2. Review the three primary methods used to classify costs into fixed and variable components: Scattergraph method, High-low method, and Account analysis method. These are widely recognized techniques in cost accounting.
3. Learn about the Scattergraph method: This involves plotting costs against activity levels on a graph to visually identify the relationship and estimate fixed and variable components.
4. Understand the High-low method: This uses the highest and lowest activity levels to calculate the variable cost per unit and fixed costs using the formula for a straight line: \( y = mx + b \), where \( y \) is total cost, \( m \) is variable cost per unit, \( x \) is activity level, and \( b \) is fixed cost.
5. Recognize that the Weighted-average method is not a primary method for classifying costs into fixed and variable components. It is used in other contexts, such as inventory valuation, but not for cost classification.