Samson owns a machine shop. In reviewing the shop’s utility bills for the past 12 months, he found that the highest bill of $2,800 occurred in July when the machines worked 1,400 machine hours. The lowest utility bill of $2,600 occurred in December when the machines worked 900 machine hours.
Requirements – using the high-low method
Calculate the variable rate per machine hour and the total fixed utility cost.
Show the equation for determining the total utility cost for the machine shop
If Samson anticipates using 1,200 machine hours in January, predict the shop’s total utility bill using the equation from requirement (b).