Cost Estimation and Break-Even Point. Water is supplied to Lake Tillem Town-ship by pumping water from a lake to a storage tank at the highest elevation in town, from which it then flows to the customers by gravity. The town council notes that the costs to pump water vary to some extent by the number of gallons pumped, but fixed costs are also included in the pumping costs. A record of gallons consumed per month and total pumping cost per month is as follows:

In addition to pumping costs, 1.1 cents in variable costs and $75,000 in fixed costs are incurred to supply water to the residents. Lake Tillem charges its residents 4.6 cents per gallon consumed. Questions: 1. Use the high-low method to obtain a cost function for Lake Tillem Townships pump-ing costs. 2. At what level of water consumption would Lake Tillem Township break even?

Gallons Consumed (000) Gallons Consumed (000) Pumping Cost Pumping Cost 1,750 $29,100 1,800 $29,700 1,900 30,800 2,300 35,900 2,150 34,000 2,000 31,800 2,050 32,600 1,500 25,500