What are the estimated monthly overhead costs

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Question - 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

715

1,347

$102,664

2

710

1,404

103,825

3

675

1,526

109,815

4

740

1,444

108,315

5

785

1,599

116,150

6

760

1,587

114,514

7

735

1,393

106,927

8

730

1,314

102,172

9

720

1,445

106,361

10

790

1,554

113,146

11

670

1,286

98,802

12

715

1,610

111,600

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 1,600 machine-hours next year. What are the estimated monthly overhead costs, assuming no inflation?

Reference no: EM133173585

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