In this week's reading, you examined three methods of cost function estimation: account classification, high-low, and regression analysis. For this week's discussion, you will assess the applicability of these methods to the Netflix and Blockbuster example.
Refer back to the Netflix and Blockbuster Financial Data handout and answer the following questions:
Which of Netflix's or Blockbuster's costs could be appropriately estimated using the account classification method? Why?
Which of Netflix's or Blockbuster's costs could be appropriately estimated using the high-low method? Why?
Which of Netflix's or Blockbuster's costs could be appropriately estimated using the regression analysis method? Why?
Are there any other methods of estimating cost functions other than the account classification, high-low, and regression analysis methods?
In general, which cost function estimation method is likely to be the best and why? Under what conditions is, or are, the best method(s) inappropriate?