Question

ijuana Tile has gathered the following information on its utility cost for the past six months. Machine Hours Utility Cost 1,300 $1,692 1,700 1,935 1,250 1,620 1,800 2,038 1,900 2,088 1,500 1,782 a. Using the high-low method, determine the cost formula for utility cost. y

Answer 1

y = $720 + $0.72 per MH

Step-by-step explanation:

The cost formula for the utility cost is shown below:

But before that following calculations need to be done

Variable cost per machine hour is

= [Total cost at highest level - Total cost at the lowest level] ÷ (Highest level-Lowest level)

= (2088 - 1620) ÷ (1900 - 1250)

= $0.72 per machine hour

Now

Total fixed cost is

= 2088 - (0.72 × 1900)

= $720

So, the Cost formula is

y = $720 + $0.72 per MH