Daisy Wong is the accountant for the Heavy Manufacturing Company. She has been asked by one of Heavy’s senior managers to provide an estimate of the firm’s utilities costs using the high-low method. Daisy has identified machine hours as the most suitable cost driver. The following costs were incurred during the previous 12 months:
1. Use the high-low method to estimate the company’s utilities cost behaviour and express it in equation form.
2. Predict the utilities cost for a month in which 39 000 machine hours are used.