Morgan Co. gathered the following information on power costs and factory machine usage for the last six months:
Month Electricity Cost Factory Machine Hours
July $24,400 13,900
August 29,200 17,600
September 29,000 16,800
October 22,340 13,200
November 19,900 11,600
December 14,900 6,600
Instructions
Using the high-low method of analyzing costs, answer the following questions and show computations to support your answers.
(a) What is the estimated variable portion of power costs per factory machine hour?
(b) What is the estimated fixed power cost each month?
(c) If it is estimated that 10,000 factory machine hours will be run in January of the next year, what is the expected total power cost for January?