Ue the high-low method to determine carmichael industries

Reference no: EM13574677

Carmichael Industries is in the process of analyzing its manufacturing overhead costs. Carmichael Industries is not sure if the number of units produced or the number of direct labor (DL) hours is the best cost driver to be used for predicting manufacturing overhead (MOH) costs. The following information is available:

Here is the list of tasks that you need to do in this assessment:

1. Are manufacturing overhead costs fixed, variable, or mixed? Explain.

2. Graph Carmichael Industries' manufacturing overhead costs against direct labor hours.

3. Graph Carmichael Industries' manufacturing overhead costs against units produced.

4. Does the data appear to be sound, or do you see any potential data problems? Explain.

5. Use the high-low method to determine Carmichael Industries' manufacturing overhead cost equation using direct labor hours as the cost driver. Assume that management believes that all the data is accurate and wants to include all of it in the analysis.

6. Estimate manufacturing overhead costs if Carmichael Industries incurs 25,500 direct labor hours in January.

Month	Manufacturing Overhead Costs	Direct Labor Hours	Units Produced	MOH Cost per DCL Hour	MOH Cost per Unit Produced
July	$463,000	23,100	3,620	$20.04	$127.90
August	513,000	26,500	4,300	19.36	119.30
September	435,000	20,000	4,230	21.75	102.84
October	450,000	21,400	3,380	21.03	133.14
November	562,000	30,000	5,790	18.73	97.06
December	438,000	20,500	3,300	21.37	132.73

Reference no: EM13574677

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