The following information is available about electricity costs for the first six months of the year. Management think that electricity costs are likely to be related to how long machines are running.MonthMachinehoursElectricityCostJanuary2,800$2,925February5,600$5,526March6,200$5,980April3,500$3,620May2,300$2,470June4,500$4,450You may wish to refer to the formula sheet to answer this question. If you haven't already downloaded it, you can download it here.Required:Using the high-low method,(a) calculate the fixed costsb. state the cost formula for estimating the electricity cost based on the machine hours

Name: The following information is available about electricity costs for the
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Description: The following information is available about electricity costs for the first six months of the year. Management think that electricity costs are likely to be related to how long machines are running.MonthMachinehoursElectricityCostJanuary2,800$2,925

High low method: Variable cost per unit = (Highest activity cost - Lowest activity cost) / (Highest…

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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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The following information is available about electricity costs for the first six months of the year. Management think that electricity costs are likely to be related to how long machines are running.

Month	Machine hours	Electricity Cost
January	2,800	$2,925
February	5,600	$5,526
March	6,200	$5,980
April	3,500	$3,620
May	2,300	$2,470
June	4,500	$4,450

You may wish to refer to the formula sheet to answer this question. If you haven't already downloaded it, you can download it here.

Required:

Using the high-low method,

(a) calculate the fixed costs

b. state the cost formula for estimating the electricity cost based on the machine hours

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