Question:
(High-low method) Information about Indiana Industrial's utility cost for the last six months of 2010 follows. The high-low method will be used to develop a cost formula to predict 2011 utility charges, and the number of machine hours has been found to be an appropriate cost driver. Data for the first half of 2010 are not being considered because the utility company imposed a significant rate change as of July 1,2010.
|
Month
|
Machine Hours
|
Utility Cost
|
|
July
|
33,750
|
$13,000
|
|
August
|
34,000
|
12,200
|
|
September
|
33,150
|
11,040
|
|
October
|
32,000
|
11,960
|
|
November
|
31,250
|
11,500
|
|
December
|
31,000
|
11,720
|
a. What is the cost formula for utility expense?
b. What is the budgeted utility cost for September 2011 if 31,250 machine hours are projected?