
Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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Transcribed Image Text:Problem 10
Valdez Motors Co. makes motorcycles. Management wants to
overhead costs to plan its operations. A recent trade publication revealed that
overhead costs tend to vary with machine hours. To check this, they collected the
following data for the past 12 months.
estimate
Overhead Costs
P 4,500
4,225
4,321
5,250
4,800
5,100
4,450
4,200
5,475
4,760
4,325
3,975
Month No.
Machine Hours
175
170
3
160
4
190
5
175
200
160
7
150
9
210
10
180
11
170
12
145
Requirements
1. Use the high-low method to estimate the fixed and variable portion of
overhead costs based on machine hours.
2. If the plant is planning to operate at a level of 200 machine hours next
period, what would be the estimated overhead costs?
3. Use the method of least square to estimate the fixed and variable portion of
overhead costs based on machine hours.
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