Academy Products manufactures a variety of custom components for use in aircraft navigation and communications systems. The controller has asked for your help in estimating fixed and variable overhead costs for Academy€™s Rio Puerco plant. The controller tells you that the best cost driver for estimating overhead is machine-hours. Monthly data on machine-hours and overhead costs for the last year have been collected and are shown below:

Required
a. Estimate the monthly fixed costs and the unit variable cost per machine-hour using the high-low estimation method.
b. Draw a scattergraph relating overhead costs to the number of machine-hours.
c. Considering your scattergraph, how much confidence do you have in your estimate from requirement(a)?

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Month Machine-Hours Overhead Costs S 660,000 2,170,000 1,220,000 780,000 3,700,000 1,400,000 1,100,000 1,500,000 2,500,000 840,000 980,000 910,000 630.000 900.000 766,000 665,000 5 ...1,035,000 800.000 750,000 816,000 935,000 680,000 715,000 700,000 5 12