Adriana Corporation manufactures football equipment. In planning for next year,

Question

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:

Use the high-low method to estimate the fixed and variable portions of overhead costs based on machine-hours. (Round your variable cost answer to 2 decimal places. Omit the "$" sign in your response.)

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? (Use rounded variable cost. Omit the "$" sign in your response.)

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:

Explanation / Answer

a Variable cost (per machine hour) =(111853-102151)/(1618-1310)= 31.5 Fixed cost = 111853-(1618*31.5)= 60886 b Overhead costs =60886+(1600*31.5)= 111286

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