Information about Orion Industrial's utility cost for the last 6 months of year 2010 follows. The high-low method will be utilized to create a cost formula to predict 2011 utility charges, and the number of machine hours is identified to be an appropriate cost driver. Data for the first half of 2010 are not being considered since the utility firm imposed a significant rate change as of July 1, 2010. Month Machine Hours Utility Cost July 33,750 $13,000 August 34,000 12,200 September 33,150 11,040 October 32,000 11,960 November 31,250 11,500 December 31,000 11,720 a. What is the cost formula for utility expense? b. If 31,250 machine hours are projected, what is the budgeted utility cost for September 2011?
Information about Orion Industrial's utility cost for the last 6 months of year 2010 follows. The high-low method will be utilized to create a cost formula to predict 2011 utility charges, and the number of machine hours is identified to be an appropriate cost driver. Data for the first half of 2010 are not being considered since the utility firm imposed a significant rate change as of July 1, 2010. Month Machine Hours Utility Cost July 33,750 $13,000 August 34,000 12,200 September 33,150 11,040 October 32,000 11,960 November 31,250 11,500 December 31,000 11,720 a. What is the cost formula for utility expense? b. If 31,250 machine hours are projected, what is the budgeted utility cost for September 2011?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Information about Orion Industrial's utility cost for the last 6 months of year 2010 follows.
The high-low method will be utilized to create a cost formula to predict 2011 utility
charges, and the number of machine hours is identified to be an appropriate cost driver.
Data for the first half of 2010 are not being considered since the utility firm imposed a
significant rate change as of July 1, 2010.
Month
Machine Hours
Utility Cost
July
33,750
$13,000
August
34,000
12,200
September
33,150
11,040
October
32,000
11,960
November
31,250
11,500
December
31,000
11,720
a. What is the cost formula for utility expense?
b. If 31,250 machine hours are projected, what is the budgeted utility cost for September
2011?
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