1.

Adriana Corporation manufactures football 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.

Month	Labor-Hours			Machine-Hours			Overhead Costs
1		730			1,360		$	102,788
2		715			1,406			103,831
3		675			1,518			109,856
4		730			1,450			108,323
5		780			1,581			116,216
6		755			1,575			114,580
7		745			1,390			106,920
8		715			1,314			102,104
9		720			1,458			106,443
10		800			1,543			113,185
11		675			1,288			102,101
12		710			1,618			115,961

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?