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How estimate the cost formula for manufacturing overhead

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Reference no: EM132621975

Selected data about Ruby Company's manufacturing operations at two levels of activity are given below:

Number of units produced 10,000 15,000
Total manufacturing costs $157,000 $225,000
Direct material cost per unit $4 $4
Direct labor cost per unit $6 $6



Required:

Question a. Using the high-low method, estimate the cost formula for manufacturing overhead. Assume that both direct material and direct labor are variable costs.

 

Question b. What is the purpose of knowing the cost formula?

Reference no: EM132621975

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