Exercise 6-25 Estimating Cost Behavior; High-Low Method (LO 6-1, 6-2, 6-5) Jonathan Macintosh is a highly successful Pen

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Exercise 6-25 Estimating Cost Behavior; High-Low Method (LO 6-1,
6-2, 6-5)
Jonathan Macintosh is a highly successful Pennsylvania
orchardman who has formed his own company to produce and package
applesauce. Apples can be stored for several months in cold
storage, so applesauce production is relatively uniform throughout
the year. The recently hired controller for the firm is about to
apply the high-low method in estimating the company’s energy cost
behavior. The following costs were incurred during the past 12
months:
Required:
1. Use the high-low method to estimate the
company’s energy cost behavior and express it in equation form. Use
the
formula Y = a + bX,
where Y denotes energy cost for a month
and X denotes pints of applesauce
produced.
2. Predict the energy cost for a month in
which 75,000 pints of applesauce are produced.