Fiske Corporation manufactures a popular regional brand of kitchen utensils. The design and variety have been fairly constant over the last three years. The managers at Fiske are planning for some changes in the product line next year, but first they want to understand better the relation between activity and factory costs as experienced with the current products. Discussions with the plant supervisor suggest that overhead seems to vary with labor-hours, machine-hours, or both. The following data were collected from the last three years of operations:

Required

a. Use the high-low method to estimate the fixed and variable portions of factory costs based on labor-hours.

b. Managers expect the plant to operate at 16,000 labor-hours next quarter. Assuming the relationship remains the same with the new product line, what are the estimated quarterly factory costs?

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A 1 Quarter 2 3 4 5 6 7 00 C 8 9 10 11 12 13 14 1 2 3 4 5 6 7 8 9 10 11 12 B Machine-Hours 18,850 18,590 17,480 19,240 21,280 19,630 19,240 18,850 18,460 20,670 17,550 18,460 C Labor-Hours D Factory Costs 14,905 $3,388,671 15,477 3,425,136 16,720 3,617,144 15,983 17,501 17,369 15,290 14,366 15,994 3,573,240 3,812,284 3,777,312 3,531,726 3,369,102 3,512,487 16,995 3,730,734 14,278 3,324,915 17,644 3,723,786