The Illinois Tools Machine Shop wants to develop a cost estimating equation for its monthly cost of electricity. It has the following data:
What would be the best equation using the high-low method?
A) Y = $2,000 + $4X
B) Y = $2,500 + $6X
C) Y = $1,500 + $8X
D) Y = $500 + $6X

Question

The Illinois Tools Machine Shop wants to develop a cost estimating equation for its monthly cost of electricity. It has the following data:
 What would be the best equation using the high-low method?
A) Y = $2,000 + $4X 
B) Y = $2,500 + $6X 
C) Y = $1,500 + $8X 
D) Y = $500 + $6X

Quizplus · Accepted Answer

($8,500 - $7,000) / (1,000 - 750) = $6 variable cost period hour
$8,500 - (1,000 × $6) = $2,500 fixed cost.
Therefore, Y = $2,500 + $6X

The Illinois Tools Machine Shop Wants to Develop a Cost