Chapter 6, Problem 26E

Jonathan Macintosh is a highly successful Pennsylvania orchardman who hits formed his own company to produce and package applesauce. Apples can be stored for several months in cold storage, so applesauce prediction is relatively uniform throughout the year. The recently hired controller for the firm is about to apply the high low method in estimating the company’s energy cost behavior the following costs were incurred during the past 12 months:

Required:

1. 1. Use the high-low method to estimate the company’s energy cost behavior and express it in equation form.
2. 2. Predict the energy cost for a month in which 26,000 pints of applesauce are produced.

Refer to the data in the preceding exercise.

Required:

1. 1. Draw a scatter diagram and graph the company’s energy cost behavior using the visual-fit method.
2. 2. Predict the energy cost for a month in which 26.000 pints of applesauce are produced.
3. 3. What peculiarity is apparent from the scalier diagram? What should the cost analyst do?