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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
1 725 1,353 $ 102,775
2 710 1,413 103,859
3 675 1,527 109,811
4 740 1,455 108,269
5 770 1,586 116,291
6 755 1,588 114,460
7 750 1,393 106,946
8 720 1,313 102,009
9 710 1,451 106,472
10 805 1,543 113,011
11 685 1,294 102,397
12 710 1,608 115,114

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?

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