Reference no: EM132866632

Question - Koch, Inc., believes their electricity costs are affected by the number of machine hours worked. Machine hours and electricity costs for the past year were as follows:

Month	Machine Hours	Electricity Costs
January	300	Rs. 6,000
February	240	4,250
March	580	7,750
April	860	9,750
May	1,040	11,250
June	940	11,000
July	1,140	14,000
August	900	12,250
September	1,240	14,250
October	740	7,750
November	480	7,000
December	380	6,500

Required - Using the high-low method,

a. Develop an estimate of variable electricity costs per machine hour.

b. Develop an estimate of fixed electricity costs per month.

c. Develop a cost function for monthly electricity costs.

d. Estimate electricity costs for a month in which 500 machine hours are worked using the cost function in requirement c above.