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Average Temperature Utility Cost January February 31°F $ 764 41 633 March 43 547 April 44 414 May 46 279 June 50 237 July 53 224 August 60 214 September 50 309 October 40 534 November 30 754 December 10 884

Average Temperature Utility Cost January February 31°F $ 764 41 633 March 43 547 April 44 414 May 46 279 June 50 237 July 53 224 August 60 214 September 50 309 October 40 534 November 30 754 December 10 884

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Horizon BP in Antelope Park, Alaska, has noticed that utility bills are substantially higher when the average monthly temperature is colder. The only thing in the shop that uses natural gas is the furnace. Because of prevailing low temperatures, the furnace is used every month of the year (though less in the summer months and very little in August). Everything else in the shop runs on electricity, and electricity use is fairly constant throughout the year. For a year, Horizon has been recording the average daily temperature and the cost of its monthly utility bills for natural gas and electricity. Average Temperature Utility Cost January 31°F $ 764 February 41 633 March 43 547 April 44 414 May June 46 279 50 237 July 53 224 August 60 214 September 50 309 October 40 534 November 30 754 December 10 884 Required: Use the high-low method to estimate utility cost for the upcoming months of January and February. The forecast for January is a near record average temperature of 5°F; temperatures in February are expected to average 40°F. January February Cost estimation
Transcribed Image Text:Horizon BP in Antelope Park, Alaska, has noticed that utility bills are substantially higher when the average monthly temperature is colder. The only thing in the shop that uses natural gas is the furnace. Because of prevailing low temperatures, the furnace is used every month of the year (though less in the summer months and very little in August). Everything else in the shop runs on electricity, and electricity use is fairly constant throughout the year. For a year, Horizon has been recording the average daily temperature and the cost of its monthly utility bills for natural gas and electricity. Average Temperature Utility Cost January 31°F $ 764 February 41 633 March 43 547 April 44 414 May June 46 279 50 237 July 53 224 August 60 214 September 50 309 October 40 534 November 30 754 December 10 884 Required: Use the high-low method to estimate utility cost for the upcoming months of January and February. The forecast for January is a near record average temperature of 5°F; temperatures in February are expected to average 40°F. January February Cost estimation
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