have a short reply to borth of these students based on what they have written:

1.)

In this lesson, I have learned about how to calculate fixed and variable costs by using the high-low method and regression method. Although I did not have any experience with the high-low method, I have experience with the regression method in my statistics courses. By comparing the two methods, we know that the high-low method uses a small amount of data to calculate the fixed and variable costs. It only takes the highest and lowest amounts during a certain period to perform the calculation. This could be a fast and easy way to use. However, since it does not take all the data into account, the accuracy of the result may not be so accurate. Also, it may not consider the effect of inflation on the costs (2023).

Whereas for the regression method, accounts all the data during the periods of interest. Performing the data by finding the best line of fit to estimate the intercept which is the fixed cost and slope which is the variable cost per unit from the total cost equation (n.d.). By performing this method, it is easy for us to analyze the relationship between the variables and help us to find how changing one variable may affect other variables, which is one of the advantages (2023). Also, as the data points are larger, the error of estimating will become smaller. So, in this case, I would use the regression method to calculate the total cost for the preceding six months which should have a large enough data size.

Reference:

High low method vs. regression analysis. Corporate Finance Institute. (2023, November 21). https://corporatefinanceinstitute.com/resources/data-science/high-low-method-vs-regression-analysis/Links to an external site.

Honer, J. (n.d.). Lesson 2: Cost Behavior - Mixed Costs. Canvas. https://psu.instructure.com/courses/2314467/modules/items/40124367

2.)

High-low method

The advantage of using the high-low method is that is fairly quick and straightforward to calculate. It often is about to able to provide a good estimate of fixed and variable costs. The primary disadvantage however with this method is that it can over or underestimate these figures. Another con of this method is that it does not account for price increases or inflation.

Least squares method

The advantage of the least squares method is that it is a highly accurate linear regression tool that can calculate fixed and variable costs with a high level of accuracy. An important advantage over the high-low method is that this method uses all data points rather than just the high and low points.

My recommendation would be to use the method of least squares. Because the example above does not specify the variability in the sales data over the period, I would elect to use the more accurate method of the two. I would deem the high-low method more appropriate for situations that need quick estimates, are relatively low stakes, and where an approximate estimate is sufficient or favored over an exact figure.