Watson Industries is in the process of analyzing its manufacturing overhead costs. Management 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:

Requirements
1. Are manufacturing overhead costs fixed, variable, or mixed? Explain.
2. Graph the company's manufacturing overhead costs against DL hours.
3. Graph the company's 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 the company's manufacturing overhead 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 the company incurs 26,000 DL hours in January.

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Manufacturing Overhead Costs Direct Labor MOH Cost per Unit МОН Сost per DL Hour Units Produced Month Produced $127.63 $123.85 $ 99.76 $133.91 $103.39 $139.14 Hours 25,000 26,700 20,000 3,800 July August . September October November $485,000 $19.40 $20.22 $540,000 4,360 4,210 3,450 5,600 3,270 $21.00 $420,000 $462,000 $21.10 21,900 32,000 20,400 $579,000 $18.09 December $455,000 $22.30