Methods of Estimating Costs: High-Low Lecouvreur Corporation manufactures soccer equipment. In planning for next year, the managers want to understand the relation between activity and overhead costs. Discussions with the plant supervisor suggest that overhead seems to vary with labor-hours, machine-hours, or both. The following data were collected from last year’s operations:

Required

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

b. Managers expect the plant to operate at a monthly average of 1,500 machine-hours next year.
What are the estimated monthly overhead costs, assuming no inflation?

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Month Labor-Hours Machine-Hours Overhead Costs 1 725 1,355 $102,687 23456 715 1,407 103,792 680 1,520 109,915 4 740 1,453 108,280 5... 780 1,591 116,229 755 1,579 114,464 7 740 1,390 107,022 8 725 1,306 102,094 9. 710 1,454 106,439 10.. 795 1,545 113,067 11.... 675 1,298 100,755 12 710 1,604 112,842