Machine Hours and Electricity Costs for Wells Industries for the Year

question 17

Essay

Machine hours and electricity costs for Wells Industries for the year were as follows:
$\begin{array}{lrr}\text { Month } & \text { Machine } & \text { Electricity } \\&\text { Hours } & \text { Costs }\\\text { January } & 2,000 & \$ 9,200 \\\text { February } & 2,320 & 10,500 \\\text { March } & 1,520 & 6,750 \\\text { April } & 2,480 & 11,500 \\\text { May } & 3,040 & 14,125\\\text { June } & 2,640 & 11,000 \\\text { July } & 3,280 & 12,375 \\\text { August } & 2,800 & 11,375 \\\text { September } & 1,600 & 7,750 \\\text { October } & 2,960 & 13,000 \\\text { November } & 3,760 & 15,500 \\\text { December } & 3,360 & 13,875\end{array}$
Required:
A. Using the high-low method, develop an estimate of variable electricity costs per machine hour.
B. Using the high-low method, develop an estimate of fixed electricity costs per month.
C. Using the high-low method, develop a cost function for monthly electricity costs.
D. Estimate electricity costs for a month in which 5,000 machine hours are worked.

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Definitions:

Unit Selling Price

The amount charged to the customer for a single unit of a product or service.

October Sales

Sales revenue generated during the month of October.

Units

In a business context, units refer to a measure of quantity, such as items produced, sold, or in inventory, used for operational and financial analyses.

Budgeted Units

Budgeted units refer to the estimated quantity of product a company plans to produce or sell in a certain period.