Question
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
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 1 720 1,353 $ 102,723 2 710 1,417 103,801 3 690 1,527 109,909 4 735 1,462 108,291 5 780 1,593 116,278 6 750 1,577 114,437 7 740 1,397 107,015 8 730 1,304 102,076 9 715 1,461 106,325 10 790 1,543 113,174 11 665 1,288 98,367 12 710 1,614 111,081 Required: a. Use the high-low method to estimate the fixed and variable portions of overhead costs based on machine-hours. (Round "Variable cost" answer to 2 decimal places.) b. Managers expect the plant to operate at a monthly average of 1,400 machine-hours next year. What are the estimated monthly overhead costs, assuming no inflation? (Round "Variable cost" answer to 2 decimal places.)
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