Question

Jack is trying to determine how he can save money by cutting his electricity bill. He is currently on a standard use plan for electricity and pays 7.5 cents per kWh. He keeps track of when he uses electricity and is thinking about switching to an interval use plan for electricity which costs 3 cents per kWh for off-peak use and 15 cents per kWh for on-peak use. Off-peak hours are from 8PM - 8AM and on-peak hours are from 8AM - 8PM. Below is the chart of his electricity usage: Jack’s Electricity Usage Per Month 1200 kWh between 8PM and 8AM 400 kWh between 8AM and 8PM Explain and justify which plan would best suit his needs. a. Jack should not switch to the interval use plan, which would cost $24 more per month. b. Jack should switch to the interval use plan, which would save him $24 per month. c. Jack should switch to the interval use plan, which would save him $96 per month. d. Jack should not switch to the interval use plan, which would cost $96 more per month.

Answer 1

B. Jack should switch to the interval use plan, which would save him $24 per month.

Explanation:

We are given that,

The off-peak hour usage per month = 1200 kWh

The on-peak hour usage per month = 400 kWh

Cost of electricity paid by Jack per kWh = 7.5 cents = $0.075

Thus, the current electricity bill =
`(1200+400)* 0.075` =
`1600* 0.075` = $120

Further, the interval use plan gives 3 cents= $0.03 per kWh for off-peak hours and 15 cents=$0.15 per kWh for on-peak hours.

The bill using interval plan =
`1200* 0.03+400* 0.15` = 36+60 = $96

Thus, the savings of Jack = Current electricity bill - Bill using interval plan

i.e. Savings of Jack = $120 - $96 = $24.

Hence, the best option for the plan to be selected by Jack is,

B. Jack should switch to the interval use plan, which would save him $24 per month.

Answer 2

Jack's current monthly bill is
(1200 kWh +400 kWh)*($0.075/kWh) = $120

On the interval use plan, Jack's monthly bill would be
(1200 kWh)*($0.03/kWh) + (400 kWh)*($0.15/kWh) = $36 + 60 = $96

If Jack were to switch, his savings would be $120 -96 = $24.

The appropriate choice is ...
b. Jack should switch to the interval use plan, which would save him $24 per month.