Methods of Estimating Costs High-Low: Racy Motors Company makes motorcycles. Management wants to estimate over- head costs to plan its operations. A recent trade publication revealed that overhead costs tend to vary with machine-hours and/or materials costs. To check this. they collected the following data for the past 12 months:

Required:

a. Use the high-low method to estimate the fixed and variable portions of overhead costs based on machine-hours.

b. If the plant is planning to operate at a level of 200 machine-hours next period. what would be the estimated overhead costs? (Assume no inflation.)

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Month Machine- Materials Overhead No. Hours Cost Costs 11 -23456789012 175 $4,750 $4,500 170 4,600 4,225 160 4,200 3,780 190 5,900 5,250 175 4,600 4,800 200 5,250 5,100 160 4,350 4,450 150 4,350 4,200 210 6,000 5,475 180 4,950 4,760 170 4,450 4,325 145 3,800 3,975