Methods of Estimating Costs: High Low
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 |
3,625 |
6,775 |
$513,435 |
2 |
3,575 |
7,035 |
518,960 |
3 |
3,400 |
7,600 |
549,575 |
4 |
3,700 |
7,265 |
541,400 |
5 |
3,900 |
7,955 |
581,145 |
6 |
3,775 |
7,895 |
572,320 |
7 |
3,700 |
6,950 |
535,110 |
8 |
3,625 |
6,530 |
510,470 |
9 |
3,550 |
7,270 |
532,195 |
10 |
3,975 |
7,725 |
565,335 |
11 |
3,375 |
6,490 |
503,775 |
12 |
3,550 |
8,020 |
564,210 |
Required
Prepare a scattergraph based on the overhead and machine hour data