A company has collected the following information regarding its cost of electricity:
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1. Based upon the above information, calculate the variable cost of electricity per machine hour, using the high-low method.
2. Compute the total fixed cost of electricity.
3. Represent the electricity cost function in equation form.
4. What is the expected electricity cost when 425 machine hours are used?
5. Why does your answer to part (4) differ from the actual cost for the month of April, when 425 machine hours were used?
6. Why would a manager use the regression method rather than the high-low method to estimate costs?