Questions:
1. What is the difference between variable and mixed costs, considering that both change in total with changes in activity levels?
2. The high-low method of analyzing mixed costs uses only two observation points: the high and the low points of activity. Are these always the best points for prediction purposes? Why or why not?
3. Discuss the reasons a company would use a predetermined overhead rate rather than actual overhead to determine cost of products or services.
4. Why are departmental predetermined OH rates more useful for managerial decision making than plantwide OH rates? Why do firms use separate variable and fixed rates rather than total rates?