Patrick Ross, the president of Ross's Wild Game Company, has asked for information about the cost behavior of manufacturing overhead costs. Specifically, he wants to know how much overhead cost is fixed and how much is variable. The following data are the only records available:
Month Machine-hours Overhead Costs ($)
February 1,700 20,500
March 2,800 22,250
April 1,000 19,950
May 2,500 21,500
June 3,500 23,950
Required:
Using the high-low method, determine the overhead cost equation. Use machine-hours as your cost driver. Why might this not be the "best" method for this data? What would you recommend?