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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
1 720 1,364 $ 102,770
2 720 1,405 103,717
3 680 1,516 109,813
4 735 1,463 108,269
5 780 1,584 116,159
6 755 1,577 114,479
7 740 1,387 106,942
8 720 1,301 102,073
9 715 1,462 106,467
10 795 1,554 113,043
11 675 1,286 101,021
12 720 1,610 114,305

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 1,700 machine-hours next year. What are the estimated monthly overhead costs, assuming no inflation?

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