# Jersey Subs, Inc. wants to find an equation to estimate monthly utility costs. Jersey Subs has...

## Question:

Jersey Subs, Inc. wants to find an equation to estimate monthly utility costs. Jersey Subs has been in business for one year and has collected the following cost data for utilities:

 Month Electricity Bill Kilowatt Hours Used Telephone Minutes Used Water Bill Water Used January 375 1,250 $92.50 1,200$75.00 32,560 February 438 1,458 $91.70 1,156$75.00 28.554 March 572 1,906 $95.32 1,353$75.00 33,508 April 422 1,406 $90.09 1,069$75.00 31,926 May 613 2,042 $98.53 1,527$75.00 32,569 June 650 2,167 $99.34 1,517$75.00 27,211 July 544 1,813 $93.91 1,276$75.00 34,829 August 622 2,073 $96.72 1,429$75.00 33,265 September 656 2,188 $96.12 1,396$75.00 35,735 October 641 2,135 $94.31 1,298$75.00 34,062 November 619 2,063 $91.49 1,145$75.00 30,472 December 659 2,198 $97.53 1,473$75.00 36,332

b. Using the high-low method, determine the cost unction for each cost.

c. Combine the preceding information to get a monthly utility cost function for Jersey.

## High Low Method:

The High Low method is a methodology used to separate the fixed and variable components of a mixed cost resulting in an equation to predict costs at different levels of usage or volume. It is very useful for projecting costs for overhead items such as electricity, telephone, water, and others. These types of costs have a variable component that changes with the level of usage but also have a part that remains fixed.

 Description Electricity Telephone Highest Cost (a) $659$99.34 Corresponding Usage (b) 2,198 1...