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. The following data were collected from last year's operations:
Month Labor- Hours Overhead Costs
Jan 3, 650 hrs. P575, 435
Feb 3, 625 hrs. P573, 720
Mar 3, 800 hrs. P579, 575
Apr 3, 700 hrs. P581, 040
May 3, 900 hrs. P581, 145
June 3, 775 hrs. P574, 320
A. Using the high- low method, what is the fixed portion of overhead costs based on labor hours?
B. Using the high- low method, what is the unit variable portion of overhead costs based on labor hours?
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