high low method 460594

10-31
High-low method. Ken Howard, financial analyst at KMW Corporation, is examining the behavior of quarterly maintenance costs for budgeting purposes. Howard collects the following data on machine hours worked and maintenance costs for the past 12 quarters:
Quarter Machine-Hours Maintenance Costs
1 1 00,000 $205,000
2 1 20,000 240,000
3 1 1 0,000 220,000
4 1 30,000 260,000
5 95,000 190,000
6 1 1 5,000 235,000
7 1 05,000 21 5,000
8 1 25,000 255,000
9 1 05,000 21 0,000
1 0 1 25,000 245,000
1 1 1 1 5,000 200,000
1 2 1 40,000 280,000
Required
1 . Estimate the cost function for the quarterly data using the high-low method.
2. Plot and comment on the estimated cost function.
3. Howard anticipates that KMW will operate machines for 1 00,000 hours in quarter 1 3. Calculate the redicted maintenance costs in quarter 1 3 using the cost function estimated in requirement 1 .