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2. The management of Casablanca Manufacturing Corporation believes that machine-hours is an appropriate measure of activity for overhead cost Shown below are machine-hours and total overhead costs for the past six months:

Machine hoursOverhead costJan 150,000 $ 339,000Feb 140,000 $ 328,000Mar 160,000 $ 350,000Apr 130,000 $ 319,500May 170,000 $ 362,000Jun 200,000 $ 400,000

If Casablanca expects to incur 185,000 machine hours next month, what will the estimated total overhead cost be using the high-low method?

3. Why is the relevant range of activity important when discussing fixed costs?

a. Fixed costs will probably increase when the volume of activity increases beyond the relevant range.

b. The relevant range provides information about the upper and lower limits of fixed costs.

c. Fixed costs will probably decrease when the volume of activity increases beyond the relevant range.

d. The relevant range is rarely achieved and is usually ignored.