Clough Company Is Interested in Establishing the Relationship Between Utility

question 56

Essay

Clough Company is interested in establishing the relationship between utility costs and machine hours.Data have been collected and a regression analysis prepared using Excel.The monthly data and the regression output follow:
$\begin{array}{|l|r|r|}\hline \text { Month } & \text { Machine } & \text { Electricity } \\& \text { Hours } & \text { Costs } \\\hline \text { January } & 3,250 & 22,080 \\\hline \text { February } & 3,770 & 25,200 \\\hline \text { March } & 2,470 & 16,200 \\\hline \text { April } & 4,030 & 27,600 \\\hline \text { May } & 4,940 & 33,900 \\\hline \text { June } & 4,290 & 26,400 \\\hline \text { July } & 5,330 & 29,700 \\\hline \text { August } & 4,560 & 27,300 \\\hline \text { September } & 2,600 & 18,600 \\\hline \text { October } & 4,810 & 31,200 \\\hline \text { Nowember } & 6,110 & 37,200 \\\hline \text { December } & 5,460 & 33,300 \\\hline\end{array}$

Required:
(a. )What is the equation for utility costs using the high-low method?
(b. )Prepare an estimate of utility costs for a month when 3,000 machine hours are worked.

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Definitions:

Budgeting

Budgeting is the process of creating a plan to spend your money, allocating financial resources to various tasks or departments within an organization.

Budgeting

The process of creating a plan to spend your money, outlining projected income versus expenses over a particular period.

Manufacturing Overhead Budget

A detailed plan showing the production costs, other than direct materials and direct labor, that will be incurred over a specified time period.

Direct Materials

Raw materials that can be directly traced to the manufacturing process of a product and are an integral part of the finished good.