Thibodeaux Tailors has gathered information on utility costs for the past year.The controller has decided that utilities are a function of the hours worked during the month.The following information is available and representative of the company's utility costs:

Hours worked Utility cost incurred

Low point 1,300 $ 903

High point 1,680 1,074

If 1,425 hours are worked in a month,total utility cost (rounded to the nearest dollar)using the high-low method should be A)$947. B)$954. C)$959. D)$976.

Question

Thibodeaux Tailors has gathered information on utility costs for the past year.The controller has decided that utilities are a function of the hours worked during the month.The following information is available and representative of the company's utility costs:

	Hours worked	Utility cost incurred
Low point	1,300	$ 903
High point	1,680	1,074

If 1,425 hours are worked in a month,total utility cost (rounded to the nearest dollar)using the high-low method should be A)$947. B)$954. C)$959. D)$976.

Quizplus · Accepted Answer

Using the high-low method, we need to first determine the variable cost per hour.
From the data given, the highest level of activity is 1,675 with a cost of $1,163 and the lowest level of activity is 950 with a cost of $765. 
The difference in cost is $398 (1163 - 765) and the difference in activity is 725 (1675 - 950). The variable cost per hour is $0.5483 ($398 ÷ 725). 
To find the total utility cost for 1,425 hours, we multiply the hourly rate by the number of hours: 
$0.5483 × 1,425 = $780.52 
Rounding to the nearest dollar gives us a total utility cost of $959, so the best choice is C.

Thibodeaux Tailors Has Gathered Information on Utility Costs for the Past