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 $ 774 February 41 643 March 43 557 April 44 424 May 46 289 June 50 247 July 53 234 August 60 224 September 50 319 October 40 544 November 30 764 December 10 919   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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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 $ 774
February 41 643
March 43 557
April 44 424
May 46 289
June 50 247
July 53 234
August 60 224
September 50 319
October 40 544
November 30 764
December 10 919

 

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.

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