Toronto Steel Fabricators make metal castings for buildings. The companys accountant likes to estimate overhead costs for the year 2022. To help him understand how costs behave in the companys manufacturing process he wants to how much of the manufacturing overhead costs are fixed and what should be the variable cost rate. Data for the past six months are as follows:

Required: (Please show detailed work including formulas used to get full credit):

A) Using the high low method, calculate the fixed cost component of overhead and the variable rate per machine hour. [4

marks]

B) What would be the cost formula that can be used to calculate the total overhead cost? [3 marks]

C) Assume that 7,800 machine hours are likely to be used in the coming month, what would be the total overhead cost

based on the above calculations. [3 marks]

Month Overhead Cost Machine Hours January $9,200 10,120 February 9,600 11,100 March 9,350 10,500 April 8,800 9,800 May 8,400 8,660 June 9,400 10,650