(High-low method) Information about Larson Inc.’s utility cost for the last six months of 2006 follows. The high-low method will be used to develop a cost formula to predict 2007 utility charges, and the number of machine hours has been found to be an appropriate cost driver. Data for the first half of 2006 are not being considered because the utility company imposed a significant rate change as of July 1, 2006.

a. What is the cost formula for utility expense?

b. What would be the budgeted utility cost for September 2007 if 33,175 machine hours are projected?LO1.

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Machine Month Hours Utility Cost July 33,750 $6,500 August 34,000 6,100 September 33,150 5,070 October 32,000 5,980 November 31,250 5,750 December 31,000 5,860