McKnight Industries is in the process of analyzing its manufacturing overhead cost. The compnay is not sure if the number of units produced or number of direct labor (DL) hours is the best cost driver to use for predicting manfactoring overhead (MOH) costs.

The following information is available:

Month	Manufactoring Overhead Costs	Direct Labor Hours	Units Produced	MOH Cost Per DL hours	MOH Cost per Unit Produced
July	$ 485,000	25,000	3,800	$19.40	$127.63
August	$ 540,000	26,700	4,360	$20.22	$123.85
September	$ 420,000	20,000	4,210	$21.00	$99.76
October	$ 462, 000	21,900	3,450	$21.10	$133.91
November	$579,000	32,000	5,600	$18.09	$103.39
December	$455,000	20,400	3,270	$22.30	$139.14

Requirement 1. Determine if the manufactoring overhead costs are fixed, variable, or mixed?

McKnight's manufactoring overhead appers to be a _______(fixed, mixed variable) cost. If it were a _______(fixed, mixed, variable) cost, it would remain constant in toal each month. If it were a ______(fixed, mixed, variable) cost, it would remain constant on a per unit (of activity) basis. Both McKnight's MOH per DL hour and MOH per unit ______ (are fixed, vary) with volume.

Requirements 2. Graph the company's manufacturing overhead cost agianst DL hours. Plot the points on the graph for the manufacturing overhead costs agianst DL hours.

Requirement 3. Graph the company's manufacturing overhead costs against units produced. Plot the points on the graph for the manufacturing overhead costs against units produced.

Requirement 4. Do the data appear to be sound or do you see any potential data problems? Explain.

There ________(does apper to be an, does not appear) outlier in the graph depicting MOH costs vs. DL hours. In the graph of MOH costs vs. units, there ________(does apper, does not appear to be any) outlier. _______( No, july,august, setp, oct. nov. dec) data point appears out of line with the other data points. If any of the data points are out of line, management ______(should, should not) check into this data before continuing with the analysis.

Requirement 5. Use the high- low method to determine the company's manufactoring overhead cost equation using DL hours as the cost driver. Assume that management believes all data to be accurate and wants to include all of it in the analysis. (Round the variable costto the nearest cent)

y= $__x + $ _____

Requirement 6. Estimate manufactoring overhead costs if the company incures 26,000 DL hours in January. January's estimated manufacturing overhead costs are $_________