The Plentiful Pear Company incurred the following monthly utility costs last yea
ID: 2377638 • Letter: T
Question
The Plentiful Pear Company incurred the following monthly utility costs last year:
Pounds of
Month Pears Canned cost
January 11,000 $ 5,500
February 9,000 4,500
March 8,000 4,300
April 10,000 5,000
May 13,000 6,500
June 14,000 7,200
July 7,000 3,500
August 6,000 3,200
September 5,000 3,400
October 4,000 2,400
November 8,000 4,200
December 10,000 4,900
REQUIRED:
1. Use the high-low method to estimate the company
The Plentiful Pear Company incurred the following monthly utility costs last year: Use the high-low method to estimate the company's utilities cost behavior and state the cost formula Predict the utilities cost for a month in which 7,500 pounds of pears are canned.Explanation / Answer
Hi,
Please find the answer as follows:
Part 1:
Variable Cost Per Unit = (7200 - 2400)/(14000 - 4000) = .48
Fixed Cost = 7200 - 14000*.48 = 480
Cost Formula = 480 + .48(X)
Part 2:
Utilities Cost = 480 + .48*7500 = 4080
Thanks.
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