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Calculating the expected utility cost by High-Low method

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Frenchy's Company needs to determine the variable utilities rate per machine hour in order to estimate cost for August. Relevant information is as follows:

April - 4500 machine hours and $9,560 Utilities expense

May - 4200 machine hours and $9,440 Utilities expense

June - 6500 machine hours and $11,725 Utilities expense

July - 7000 machine hours and $11,400 Utilities expense

Frenchy's management anticipates producing 5,000 units in August. The company uses the high-low method to analyze costs. Using the high-low method, determine the expected costs for Utilities in August. B. Using the data calculated above, estimate the utilities cost for August.

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Solution describes the steps to calculate expected utility cost by using High-Low method.

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Highest level of activity=x2=7000
Total Utilities expanses associated with highest level of activity=y2=$11400

Lowest level of ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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