High-low method, determining an equation for electricity cost, Forecasting electricity cost at a volume using such equation.
Westminster Company has had the following experience over the past five quarters:
|
Units produced
|
Electricity cost ($)
|
|
27,000
|
101,000
|
|
32,000
|
120,000
|
|
31,000
|
116,000
|
|
20,000
|
84,000
|
|
22,000
|
90,000
|
a) Using the high-low method, determine an equation for electricity cost (Y) as a function of units produced (X). Assume a linear function.
b) Using your equation, forecast electricity cost at a volume of 29,000 units produced.