Northern Lights Company manufacture recreated painting products in a highly automated assembly plant in Yukon, North...

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Accounting

Northern Lights Company manufacture recreated painting productsin a highly automated assembly plant in Yukon, North WestTerritories. Their automated system is in its first year ofoperation, and management is still unsure of the best way toestimate the overhead costs of operations for budgetary purposes.For the first six months of operations the following data werecollected:
Observation
Machine-hours
Kilowatt-hours
Total Overhead Costs
January
1,950
2,260,000
116,000
February
1,825
2,170,000
114,000
March
1,900
2,250,000
115,000
April
1,650
2,145,000
114,000
May
1,625
2,100,000
105,000
June
1,550
2,060,000
100,000
Required:
1) Compute a cost estimating equation for each independentvariable (machine-hours and kilowatt-hours) using the high-lowmethod.
2) For July the company ran the machines for 1,600 hours andused 2,075,000 kilowatt hours of power. The overhead costs totaled$95,000. Which driver was the best predictor for July?

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Northern Lights Company manufacture recreated painting productsin a highly automated assembly plant in Yukon, North WestTerritories. Their automated system is in its first year ofoperation, and management is still unsure of the best way toestimate the overhead costs of operations for budgetary purposes.For the first six months of operations the following data werecollected:ObservationMachine-hoursKilowatt-hoursTotal Overhead CostsJanuary1,9502,260,000116,000February1,8252,170,000114,000March1,9002,250,000115,000April1,6502,145,000114,000May1,6252,100,000105,000June1,5502,060,000100,000Required:1) Compute a cost estimating equation for each independentvariable (machine-hours and kilowatt-hours) using the high-lowmethod. 2) For July the company ran the machines for 1,600 hours andused 2,075,000 kilowatt hours of power. The overhead costs totaled$95,000. Which driver was the best predictor for July?

Observation	Machine-hours	Kilowatt-hours	Total Overhead Costs
January	1,950	2,260,000	116,000
February	1,825	2,170,000	114,000
March	1,900	2,250,000	115,000
April	1,650	2,145,000	114,000
May	1,625	2,100,000	105,000
June	1,550	2,060,000	100,000