Reference no: EM131826362

Problem - Tessmer Manufacturing Company produces inventory in a highly automated assembly plant in Olathe, KS. The automated system is in its first year of operation and management is still unsure of the best way to estimate the overhead costs of operations for budgetary purposes. For the first six months of operation, the following data was collected:

Costs	Machine hours	Kilowatt hours	Total Overhead
January	3,800	4,520,000	$138,000
February	3,650	4,340,000	136,800
March	3,900	4,500,000	139,200
April	3,300	4,290,000	136,800
May	3,250	4,200,000	126,000
June	3,100	4,120,000	120,000

Question 1: Use the high-low method to determine the estimating cost function with machine-hours as the cost driver.

Question 2: Use the high-low method to determine the estimating cost function with kilowatt-hours as the cost driver.

Question 3: For July, the company ran the machines for 3,000 hours and used 4,000,000 kilowatt-hours of power. The overhead costs totaled $114,000. Which cost driver was the best predictor for July?