Managerial Accounting: E6-25 Jonathan Macintosh is a highly successful Pennsylvania orchardman

Managerial Accounting
E6-25

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:

Month Pints of Applesauce Produced Energy Cost

January 35,000 23,400

February 21,000 22,100

March 22,000 22,000

April 24,000 22,450

May 30,000 22,900

June 32,000 23,350

July 40,000 28,000

August 30,000 22,800

Septembe 30,000 23,000

October 28,000 22,700

November 41,000 24,100

December 39,000 24,950



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 26,000 pints of applesauce are produced
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