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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
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.
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