Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 42

Cost Estimation, High-Low Method Antelope Park Amoco (APA) in Antelope Park, Alaska, has noticed that utility bills are substantially higher the colder the average monthly temperature is. The only thing in the shop that uses natural gas is the furnace. Because of prevailing low temperatures, the furnace is used every month of the year (though less in the summer months and very little in August). Everything else in the shop runs on electricity, and electricity use is fairly constant throughout the year.

For a year, APA has been recording the average daily temperature and the cost of its monthly utility bills for natural gas and electricity.

	Average Temperature	Utility Cost
January	31 ° F	$760
February	41	629
March	43	543
April	44	41 0
May	46	275
June	50	233
July	53	220
August	60	210
September	50	305
October	40	530
November	30	750
December	20	870

Required Use the high-low method to estimate utility cost for the upcoming months of January and February. The forecast for January is a near record average temperature of 10°F; temperatures in February are expected to average 40°F.