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Problem - Bob Jones owns a catering company that stages banquets and parties for both individuals and companies. The business is seasonal, with heavy demand during the summer months and year-end holidays and light demand at other times. Bob has gathered the following cost information from the past year:
Month
Labor Hours
Overhead Costs
January
2,500
$54,217
February
2,946
61,661
March
3,003
63,220
April
4,215
67,860
May
4,695
67,704
June
5,653
76,668
July
6,623
74,236
August
7,500
79,364
September
7,222
75,480
October
4,527
71,400
November
3,148
65,856
December
6,764
73,724
Total
58,796
$831,390
a. Using the high-low method, compute the overhead cost per labor hour and the fixed overhead cost per month.
b. Bob has booked 2,946 labor hours for the coming month. How much overhead should he expect to incur?
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