Hartman Company€™s Lucas plant manufactures thermostatic controls. Plant management has experienced fluctuating monthly overhead costs and wants to estimate overhead costs accurately to plan its operations and its financial needs. Interviews with plant personnel and studies reported in trade publications suggest that overhead in this industry tends to vary with labor-hours. A member of the controller€™s staff proposed that the behavior pattern of these overhead costs be determined to improve cost estimation. Another staff member suggested that a good starting place for determining cost behavior patterns is to analyze historical data. Following this suggestion, monthly data were gathered on labor-hours and overhead costs for the past two years. No major changes in operations occurred over this period of time. The data are shown in the following table:

Required
a. Use the high-low estimation method to estimate the overhead cost behavior (fixed and variable portions components of cost) for the Lucas plant.
b. Prepare a scattergraph showing the overhead costs plotted against the labor-hours.
c. Use a spreadsheet program to compute regression coefficients to describe the overhead cost equation.
d. Use the results of your regression analysis to develop an estimate of overhead costs assuming 350,000 labor-hours will be worked nextmonth.

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Month Labor-Hours Overhead Costs 251,563 238,438 192,500 271,260 323,760 290,938 271,260 251,563 231,875 343,438 185,938 231,875 382,813 376,250 290,938 395,938 356,563 323,750 389,376 317,188 343,438 336,875 382,813 376,250 $2,741,204 2,166,231 1,902,236 2,590,765 3,071,812 2,618,161 2,480,231 2,745,558 2,211,799 3,437,704 2,314,436 2,550,630 3,603,709 3,404,786 3,016,493 3,638,331 3,553,886 3,191,617 3,481,714 3,219,519 3,495,424 3,207,258 3,600,622 3,736,658 10 12 14 15 17 18 21 24