Solution-Methods of estimating costs

Methods of estimating costs

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Reference no: EM13545568

Methods of Estimating Costs: High-Low

Adriana Corporation manufactures football equipment. In planning for next year, the managers want to understand the relation between activity and overhead costs. Discussions with the plant supervisor suggest that overhead seems to vary with labor-hours, machine-hours, or both. The following data were collected from last year's operations:

Month	Labor-Hours	Machine-Hours	Overhead Costs
1	3,625	6,775	$513,435
2	3,575	7,035	518,960
3	3,400	7,600	549,575
4	3,700	7,265	541,400
5	3,900	7,955	581,145
6	3,775	7,895	572,320
7	3,700	6,950	535,110
8	3,625	6,530	510,470
9	3,550	7,270	532,195
10	3,975	7,725	565,335
11	3,375	6,490	503,775
12	3,550	8,020	564,210

Required

a. Use the high-low method to estimate the fixed and variable portions of overhead costs based on machine-hours.

b. Managers expect the plant to operate at a monthly average of 7,500 machine-hours next year. What are the estimated monthly overhead costs, assuming no inflation?

Reference no: EM13545568

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Methods of estimating costs

Reference no: EM13545568

Reference no: EM13545568

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