Problem:
Month Machine Hours Utility Cost
Jan 200 $300
Feb 325 440
March 400 480
April 410 490
May 525 620
June 680 790
July 820 840
Aug 900 900
1. Determine the fixed and variable costs using:
A. Scattergraph Method
B. High-Low Method
2. Determine the cost formula using both methods.
3. Within the relevant range, can the formula be reliably used to predict utility cost? Can the a and b values in the cost formula be interpreted as fixed and variable costs? Why or why not?
4. Using both formulas predict the utility cost in a month the uses 850 machine hours?