Carney Cabinets Ltd is a furniture manufacturing company with its factories located in six cities in the United Kingdom. The company has recently introduced an automated system, but management is still unsure of the best way to estimate the overhead costs of operations for budgetary purposes. The following details relate to the first 6 months of operations:

Required

1. Use the high-low method to determine the estimating cost function with labor-hours as the cost driver.
2. Use the high-low method to determine the estimating cost function with machine-hours as the cost driver.
3. At the factory located in Coventry, the company ran the machines for 3,000 hours and used 4,000,000 machine-hours of power. The overhead costs totaled £114,000. Which cost driver was the best predictor for the Coventry factory?

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Cities Manchester Birmingham Milton Keynes Leeds York Coventry Labor-Hours 3,800 3,650 3,900 3,300 3,250 3,100 Machine-Hours 4,520,000 4,340,000 4,500,000 4 290 000 4,200,000 4,120,000 Overhead Costs (£) 138,000 136,800 139,200 136 800 126,000 120,000