Question - High-low method
Information about Indiana Industrial's utility cost for the last six months of 2010 follow. 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?