Question

The following information relates to ABC Company's utilities cost and activity
for the first six months of 2021:

         Month           Utilities Costs        Units Produced
         January             $17,200                6,200
         February             14,500                5,300
         March                18,600                7,100
         April                13,700                4,800
         May                  15,900                5,900
         June                 12,800                4,600

ABC Company expects to produce 6,500 units during July.

Using the high-low method, calculate ABC Company's expected utilities cost
for July.

Answer 1

	Calculation of expected utilities cost for July as per high-low method:
	High Activity	=	7,100 units	=	March
	Low Activity	=	4,600 units	=	June
	Utilities cost of :
	March			=	$       18,600
	June			=	$       12,800
	Variable cost per unit	=	($18,600 - $ 12,800) / (7,100 - 4,600)
		=	($5,800) / (2,500)
		=	$2.32 per unit produced
	To calculate total fixed cost:
	As per high activity	=	$18,600 - (7,100 X $2.32)	=	$         2,128
	As per low activity	=	$ 12,800 - (4,600X $2.32)	=	$         2,128
	Cost formula for utilities cost	=	$2,128 + $2.32X
	Expected utilities cost for July	=	$2,128 + ($2.32*6,500)	=	$       17,208