Nutt Industries electricity costs and machine hours over a six-month period follow: Using the high-low method, what is the formula that can be used to estimate electricity costs at different levels of volume?
A)Electricity costs = $2,800 + ($1.00 x number of machine hours)
B)Electricity costs = $2,600 + ($1.00 x number of machine hours)
C)Electricity costs = $400 + ($1.67 x number of machine hours)
D)Electricity costs = $3,600 + ($.60 x number of machine hours)

Question

Nutt Industries electricity costs and machine hours over a six-month period follow:  Using the high-low method, what is the formula that can be used to estimate electricity costs at different levels of volume?
A)Electricity costs = $2,800 + ($1.00 x number of machine hours) 
B)Electricity costs = $2,600 + ($1.00 x number of machine hours) 
C)Electricity costs = $400 + ($1.67 x number of machine hours) 
D)Electricity costs = $3,600 + ($.60 x number of machine hours)

Quizplus · Accepted Answer

Variable cost:
 11eb16ac_e017_9542_984d_232b30ff1146_TB6154_00 Variable cost per labor hour = $600 / 1,000 hours = $.60/machine hour
Fixed cost:
 11eb16ac_e017_9543_984d_a557ec07d20a_TB6154_00 Electricity costs = $3,600 + ($.60 x number of machine hours)

Nutt Industries Electricity Costs and Machine Hours Over a Six-Month