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