The Feline Company Has Been Having Some Difficulties Estimating Its

The Feline Company has been having some difficulties estimating its manufacturing overhead costs. In the past, manufacturing overhead costs have been related to production levels. However, some production managers have indicated that the size of their production lots might also be having an impact on the amount of their monthly manufacturing overhead costs. In order to investigate this possibility, the company collected information on its monthly manufacturing overhead costs, production in units, and average production lot size for 2020.
$\begin{array}{lllll}&&& \text {Average }\\&&& \text {Monthly}\\& \text { Production } & \text { Manufacturing } & \text { Production } \\\text { Month } & \text { (Units) } & \text { Overhead Cost } & \text { Lot Size }\\1 & 75,000& \$ 25,800 &20 \\2 & 90,000 & 843,875 & 19 \\3 & 65,000 & 910,125 & 24 \\4 & 80,000& 946,000 & 19 \\5 & 55,000 & 879,000 & 24\\6 & 50,000 & 825,000 & 18 \\7 & 85,000& 960,000 & 22 \\8 & 105,000& 1,053,500 & 25 \\9 & 102,000& 1,020,000& 23 \\10 & 68,000& 905,000 & 20 \\11 & 75,000 & 938,000 & 22 \\12 & 95,000 & 995,000 & 24\end{array}$

Required:
(a.) Use the high-low method to estimate next month's manufacturing overhead costs, assuming the company is planning to produce 92,000 units.
(b.) Use the high-low method to estimate next month's manufacturing overhead costs, assuming the company is planning to run a 21-lot size.

Correct Answer:

Verified

(a.)
Variable cost per unit = ($1,053,50...

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