Treetop Company recorded the following information concerning its Manufacturing Overhead costs and machine hours. The president has asked you to determine the relationship between the two so that future costs can be predicted based on the cost equation.

Required:

1. Using the high-low method, determine the fixed costs and the variable rate by using the formula Total Costs = Fixed Costs + (variable rate x units) or Y=a+bX. Answer Variable Rate: 111011111112111311141116111811201356136413721373118060121564125664128600130112131222732614734060737264741722742262742400 Fixed Costs: 111011111112111311141116111811201356136413721373118060121564125664128600130112131222732614734060737264741722742262742400
2. Management is predicting that in January 2016, the machine hours will be 550 hours. Based on your work above, the total Manufacturing Overhead costs for January 2016 (total of Fixed + Variable for January 2016) will be 111011111112111311141116111811201356136413721373118060121564125664128600130112131222732614734060737264741722742262742400

   Month	Number of Machine Hours	Manufacturing Overhead Costs
   January	341	$524,908
   February	402	542,010
   March	318	479,280
   April	496	698,340
   May	485	528,250
   June	442	654,660
   July	351	541,970
   August	480	678,900
   September	330	468,540
   October	498	679,440
   November	428	626,780
   December	400	540,500