21. LO.4 (Highlow method) Information about Indiana Industrials utility cost for the last six months of 2010 follows. Th e highlow method will be used to develop a cost formula to predict 2011 utility charges, and the number of machine hours has been found to be an appropriate cost driver. Data for the fi rst half of 2010 are not being considered because the utility company imposed a signifi cant rate change as of July 1, 2010. Month Machine Hours Utility Cost July 33,750 $13,000 August 34,000 12,200 September 33,150 11,040 October 32,000 11,960 November 31,250 11,500 December 31,000 11,720 a. What is the cost formula for utility expense? b. What is the budgeted 30. LO.6 & LO.7 (Absorption vs. variable costing) Reeses Tot Toy Boxes uses variable costing to manage its internal operations. Th e following data relate to the companys fi rst year of operation, when 25,000 units were produced and 21,000 units were sold. Variable costs per unit Direct material $50 Direct labor 30 Variable overhead 14 Variable selling costs 12 Fixed costs Selling and administrative $750,000 Manufacturing 500,000 How much higher (or lower) would the companys fi rst-year net income have been if absorption costing had been used rather than variable costing? Show computations