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

Requirements
1. Are manufacturing overhead costs fixed, variable, or mixed? Explain.
2. Graph Cherestal Industries€™ MOH costs against DL hours.
3. Graph Cherestal Industries€™ MOH 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 Cherestal Industries€™ MOH cost equation using DL hours as the cost driver. Assume that management believes that all the data are accurate and wants to include all of it in the analysis.
6. Estimate MOH costs if Cherestal Industries incurs 25,500 DL hours in January.

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MOH Manufacturing Direct MOH Cost Overhead Costs Labour Unts Cost per per Unit Month July August.5 September Hours Produced DL Hour Produced $463,000 23,100 3,620 $20.04 $127.90 119.30 102.84 133.14 97.06 132.73 513,000 26,500 4,300 435,000 20,000 4,230 19.36 21.75 21.03 18.73 21.37 November.. December. 562,000 30,000 5,790 438,000 20,500 3,300