Selected data about Ruby Company's manufacturing operations at two levels of activity are given below:

Number of units produced 10,000 15,000

Total manufacturing costs $157,000 $225,000

Direct material cost per unit $4 $4

Direct labor cost per unit $6 $6

Required:

a. Using the high-low method, estimate the cost formula for manufacturing overhead. Assume that both direct material and direct labor are variable costs.

b. What is the purpose of knowing the cost formula?