Jonathan macintosh is a highly successful pennsylvania orchardman who

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

September …………………………………………………… 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.

2. Predict the energy cost for a month in which 24,500 pints of applesauce are produced.

3. Draw a scatter diagram and explain the correlation, if exist, between the production of a pint of apple sauce and the energy cost.