Use the high-low method to estimate the companys energy

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Reference no: EM13480904

Jonathan Macintosh is a highly successful Pennsylvania orchardman who has formed his own company to produce and package applesauce. Apples can be stored for several months in cold storage, so applesauce production is relatively uniform throughout the year. The recently hired controller for the firm is about to apply the high-low method in estimating the company's energy cost behavior. The following costs were incurred during the past 12 months:

Month Pints of Applesauce Produced Energy Cost
January 109,000 $ 70,600
February 67,000 66,100
March 70,000 66,800
April 76,000 67,950
May 94,000 69,100
June 100,000 70,250
July 124,000 70,300
August 94,000 68,800
September 94,000 69,400
October 88,000 68,500
November 127,000 72,700
December 121,000 71,400

Required:

1.Use the high-low method to estimate the company's energy cost behavior and express it in equation form. Use the formula Y = a + bX, where Y denotes energy cost for a month and X denotes pints of applesauce produced.


Total energy cost = $_____ + $______ X

2.Predict the energy cost for a month in which 78,000 pints of applesauce are produced

Energy cost $

Reference no: EM13480904

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