Methods of Estimating Costs: High-Low (LO 5-4) 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:

Required 1. Use the high-low method to estimate the fixed and variable portions of overhead costs based on machine-hours. 2. Managers expect the plant to operate at a monthly average of 7,500 machine-hours next year. What are the estimated monthly overhead costs, assuming no inflation?

Month 1 2 3 4 5 6 6 7 8 9 10 11 12 Labor-Hours Machine-Hours Overhead Costs 3,625 6,775 $513,435 3,575 7,035 518,960 3,400 7,600 549,575 3,700 7,265 541,400 3,900 7,955 581,145 3,775 7,895 572,320 3.700 6.950 535,110 3,625 6,530 510,470 3,550 7,270 532,195 3,975 7,725 565,335 3,375 6,490 503,775 3,550 8,020 564,210