Adriana Corporation manufactures football equipment. In planning for next year, the managers want to understand...
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Accounting
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
720
1,359
$
102,797
2
710
1,405
103,880
3
675
1,526
109,975
4
750
1,461
108,240
5
785
1,592
116,202
6
750
1,577
114,524
7
740
1,383
106,987
8
725
1,309
102,065
9
700
1,456
106,378
10
795
1,540
113,099
11
670
1,294
99,749
12
715
1,612
111,992
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.)
b. Managers expect the plant to operate at a monthly average of 1,500 machine-hours next year. What are the estimated monthly overhead costs, assuming no inflation? (Round"Variable cost"answer to 2 decimal places.)
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