Carmichael Industries is in the process of analyzing its manufacturing overhead costs. Carmichael Industries is not sure if the number of units produced or the number of direct labor (DL) hours is the best cost driver to use for predicting manufacturing overhead (MOH) costs. The following information is available:

1. Are manufacturing overhead costs fixed, variable, or mixed? Explain.
2. Graph Carmichael Industries’ manufacturing overhead costs against DL hours.
3. Graph Carmichael Industries’ manufacturing overhead costs against units produced.
4. Do the data appear to be sound or do you see any potential data problems? Explain.
5. Use the high- low method to determine Carmichael Industries’ manufacturing over-head cost equation using DL hours as the cost driver. Assume that management ­believes all the data to be accurate and wants to include all of it in the analysis.
6. Estimate manufacturing overhead costs if Carmichael Industries incurs 24,500 DL hours inJanuary.

  • CreatedAugust 27, 2014
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