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How do estimate cost formula for manufacturing overhead

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Reference no: EM132625000

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:

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

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

Reference no: EM132625000

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