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What is the purpose of knowing the cost formula

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Reference no: EM131703533

Question - 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:

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

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

Reference no: EM131703533

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