Reference no: EM132171951

Renkas Industries is in the process of analyzing its manufacturing overhead costs. Management is not sure if the number of units produced or number of direct labor (DL) hours is the best cost driver to use for predicting manufacturing overhead (MOH) costs. The following information is available: Data Table Month Manufacturing DL Hours Units MOH Cost MOH Cost Overhead Costs Produced per DL Hour per Unit Produced July $475,000 25,500 3,640 $18.63 $130.49 August $518,000 28,000 4,350 $ 18.50 $119.08 September $469,000 22,000 4,260 $ 21.32 $110.09 October $460,000 22,800 3,420 $ 20.18 $134.50 November $586,000 31,000 5,800 $18.90 $101.03 December $450,000 22,200 3,280 $ 20.27 $137.20 Requirements 1. Are manufacturing overhead costs fixed, variable, or mixed? Explain. 2. Graph the company’s manufacturing overhead costs against DL hours. 3. Graph the company’s manufacturing overhead costs against units produced. 4. Do the data appear to be sound, or do you see any potential data problems? Explain. 5. Use the high-low method to determine the company’s manufacturing overhead cost equation using DL hours as the cost driver. Assume that management believes all data to be accurate and wants to include all of it in the analysis. 6. Estimate manufacturing overhead costs if the company incurs 26,000 DL hours in January.