Jonathan
Macintosh is a highly successful upstate New York orchardman who has formed his
own company to produce and package applesauce. Apples can be stored for several
months in cold storage, so applesauce production is relatively uniform
throughout the year. The recently hired controller for the firm is about to
apply the high-low method in estimating the company’s energy cost behavior. The
following costs were incurred during the past 12 months:
|
Month
|
Pints of Applesauce
Produced
|
Energy Cost
|
|
January
|
35,000
|
$23,400
|
|
February
|
21,000
|
22,100
|
|
March
|
22,000
|
22,000
|
|
April
|
24,000
|
22,450
|
|
May
|
30,000
|
22,900
|
|
June
|
32,000
|
23,350
|
|
July
|
40,000
|
28,000
|
|
August
|
30,000
|
22,800
|
|
September
|
30,000
|
23,000
|
|
October
|
28,000
|
22,700
|
|
November
|
41,000
|
24,100
|
|
December
|
39,000
|
24,950
|
Required:
1. Use the
high-low method to estimate the company’s energy cost behavior and express it
in equation form.
2. Predict
the energy cost for a month in which 26,000 pints of applesauce are produced.
SOLUTION PREVIEW
1
|
Month
|
Units
|
Energy Cost
|
|
|
November
|
High
|
41,000
|
24,100
|
|
February
|
Low
|
21,000
|
22,100
|
|
Difference
|
20,000
|
2,000
|
File name: E6-25 Jonathan
Macintosh.xlsx File type: . xlsx PRICE:$7
