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Bradford Company derived the following cost relationship from a regression analysis of its monthly manufacturing overhead cost:

C = $80,000 + $12M

where:

C = monthly manufacturing overhead cost, and

M = machine hours

The standard error of estimate of the regression is $6,000. The standard time required to manufacture one six-unit case of Bradford's single product is two machine hours. Bradford applies manufacturing overhead to production on the basis of machine hours, and its normal annual production is 50,000 cases.

Bradford's estimated variable manufacturing overhead cost for a month in which scheduled production is 5,000 cases would be:

• $200,000.

• $120,000.

• Some amount other than these answer choices.

• $140,000.

• $80,000.

PART TWO:

Home Remodeling Inc. recently obtained a short-term bank loan from City National Bank. The bank required that certain credit information and pro forma financial statements be maintained through the life of the loan. In order to prepare the pro forma statements, Home Remodeling must forecast total overhead cost. The actual machine hours and overhead cost are presented below for the past six months.

Month	Overhead Cost			Machine Hours
January	$	3,185			1,274
February		3,484			1,394
March		2,996			1,150
April		3,210			1,235
May		3,315			1,230
June		3,440			1,300

Using the high-low method, total monthly fixed overhead cost is calculated to be:

• $626.

• $612.

• $690.

• $696.

• $722.

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