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Adriana Corporation manufactures football equipment. In planning for next year, the managers want to understand the relation between activity and overhead costs. Discussions with
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 1 Labor-Hours 725 Machine-Hours 1,353 Overhead Costs $ 102,722 2 715 1,405 103,837 3 675 1,528 109,947 735 1,452 108,368 5 775 1,592 116,233 6 760 1,584 114,514 745 1,383 106,975 8 715 1,318 102,183 9 710 1,450 106,410 10 790 1,545 113,065 11 680 1,296 100,074 12 715 1,606 112,164 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.) Variable cost (per machine hour) Fixed cost b. Managers expect the plant to operate at a monthly average of 1,600 machine-hours next year. What are the estimated monthly overhead costs, assuming no inflation? (Round "Variable cost" answer to 2 decimal places.) Overhead costs
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