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		730			1,361		$	102,782
2		705			1,415			103,865
3		690			1,518			109,983
4		735			1,452			108,299
5		775			1,584			116,251
6		745			1,578			114,517
7		740			1,387			106,912
8		725			1,300			102,123
9		710			1,457			106,341
10		790			1,541			113,033
11		680			1,294			103,448
12		715			1,612			116,804

Required:

a. Use the high-low method to estimate the fixed and variable portions of overhead costs based on machine-hours. (Round "Variable cost" answer to 2 decimal places.)

Variable Cost (per machine hour)=

Fixed Cost=

b. Managers expect the plant to operate at a monthly average of 1,700 machine-hours next year. What are the estimated monthly overhead costs, assuming no inflation? (Round "Variable cost" answer to 2 decimal places.)

Answer 1