Delia, Inc. is preparing a budget for next year and requires a breakdown of the cost of steam used in its factory into fixed and variable components. The following data on the cost of steam used and direct labor hours worked are available for the last 6 months:

Required
A. Use the high/low method to calculate the estimated variable cost of steam per direct labor hour.
B. Prepare a graph of the cost of steam and the direct labor hours. Show labor hours on the x-axis and costs on the y-axis. What can you observe from the graph you prepared? (Set the minimum y-axis value to$11,000.)

Transcribed Image Text:

Cost of Steam July August September October November December 15,850 13,400 16,370 19,800 17,600 18,500 $101,520 Direct Labor Hours 3,000 2,050 2,900 3,650 2,670 2,650 16,920