2. The Ramon Company is a manufacturer that is interested in developing a cost formula to estimate the fixed and variable components of its monthly manufacturing overhead costs. The company wishes to use machine-hours as its measure of activity and has gathered the data below for this year and last year: Last Year Current Year Months Machine Hours Overhead Cost Machine Hours Overhead Cost January 21000 $84000 21000 $86000 February 25000 $99000 24000 $93000 March 22000 $89500 23000 $93000 April 23000 $90000 22000 $87000 May 20500 $81500 20000 $80000 June 19000 $75500 18000 $76500 July 14000 $70500 12000 $67500 August 10000 $64500 13000 $71000 September 12000 $69000 15000 $73500 October 17000 $75000 17000 $72500 November 16000 $71500 15000 $71000 December 19000 $78000 18000 $75000 The company leases all of its manufacturing equipment. The lease arrangement calls for a flat monthly fee up to 19,500 machine-hours. If the machine-hours used exceeds 19,500, then the fee becomes strictly variable with respect to the total number of machine-hours consumed during the month. Lease expense is a major element of overhead cost. 1. Using the high-low method, estimate a manufacturing overhead cost formula. 2. Assume a least-squares regression analysis using all of the given data points estimated the total fixed costs to be $40,102 and the variable costs to be $2.13 per machine-hour. Do you have any concerns about the accuracy of the high-low estimates that you have computed or the least-squares regression estimates that have been provided? 3. Assume that the company consumes 22,500 machine-hours during a month. Using the high low method, estimate the total overhead cost that would be incurred at this level of activity. Be sure to consider only the data points contained in the relevant range of activity when performing your computations. 4. Comment on the accuracy of your high-low estimates assuming a least-squares regression analysis using only the data points in the relevant range of activity estimated the total fixed costs to be $10,090 and the variable costs to be $3.53 per machine-hour. 2. The Ramon Company is a manufacturer that is interested in developing a cost formula to estimate the fixed and variable components of its monthly manufacturing overhead costs. The company wishes to use machine-hours as its measure of activity and has gathered the data below for this year and last year: Last Year Current Year Months Machine Hours Overhead Cost Machine Hours Overhead Cost January 21000 $84000 21000 $86000 February 25000 $99000 24000 $93000 March 22000 $89500 23000 $93000 April 23000 $90000 22000 $87000 May 20500 $81500 20000 $80000 June 19000 $75500 18000 $76500 July 14000 $70500 12000 $67500 August 10000 $64500 13000 $71000 September 12000 $69000 15000 $73500 October 17000 $75000 17000 $72500 November 16000 $71500 15000 $71000 December 19000 $78000 18000 $75000 The company leases all of its manufacturing equipment. The lease arrangement calls for a flat monthly fee up to 19,500 machine-hours. If the machine-hours used exceeds 19,500, then the fee becomes strictly variable with respect to the total number of machine-hours consumed during the month. Lease expense is a major element of overhead cost. 1. Using the high-low method, estimate a manufacturing overhead cost formula. 2. Assume a least-squares regression analysis using all of the given data points estimated the total fixed costs to be $40,102 and the variable costs to be $2.13 per machine-hour. Do you have any concerns about the accuracy of the high-low estimates that you have computed or the least-squares regression estimates that have been provided? 3. Assume that the company consumes 22,500 machine-hours during a month. Using the high low method, estimate the total overhead cost that would be incurred at this level of activity. Be sure to consider only the data points contained in the relevant range of activity when performing your computations. 4. Comment on the accuracy of your high-low estimates assuming a least-squares regression analysis using only the data points in the relevant range of activity estimated the total fixed costs to be $10,090 and the variable costs to be $3.53 per machine-hour