Problem 1: Mixed Cost Analysis Using Three Methods The Ramon Company manufactures a wide range of products at several locations. The Franklin plant, which manufactures electrical components, has been experiencing difficulties with fluctuating monthly overhead costs. These fluctuations have made it difficult to estimate the level of over-head that will be incurred for a month. Management wants to be able to estimate overhead costs accurately to better plan its operational and financial needs. A trade publication indicates that for companies manufacturing electrical components, overhead tends to vary with direct labor-hours, but may contain both fixed and variable elements. A member of the accounting staff has suggested that a good starting place for determining the cost behavior of overhead costs would be an analysis of historical data. The methods that have been proposed for determining the cost behavior pattern include high-low, scattergraph, and least-squares regression. Data on direct labor-hours and overhead costs have been collected for the past two years. The raw data are as follows: Last Year This Year Direct Labor- Overhead Direct Labor- Overhead Month Hours Costs Hours Costs January 20,000 P84,000 21,000 P86,000 February 25,000 P99,000 24,000 P93,000 March 22,000 P89,500 23,000 P93,000 April 23,000 P90,000 22,000 P87,000 May 20,000 P81,500 20,000 P80,000 June 19,000 P75,500 18,000 P76,500 July 14,000 P70,500 12,000 P67,500 August 10,000 P64,500 13,000 P71,000 September 12,000 P69,000 15,000 P73,500 October 17,000 P75,000 17,000 P72,500 November 16,000 P71,000 15,000 P71,000 December 19,000 P78,000 18,000 P75,000All equipment in the Franklin plant is leased under an arrangement calling for a flat fee up to 19,500 direct labor-hours, after which lease charges are assessed on an hourly basis. Lease expense is a major element of overhead cost. Required: 1. Using the high-low method, estimate the cost formula for overhead in the Franklin plant. 2. Repeat (1) above, this time using the least-squares regression method. 3. Prepare a scattergraph using all of the date for the two-year period. Fit a straight line or lines to the plotted points using a ruler. In this part it is not necessary to compute the fixed and variable cost elements. 4. Assume that the Franklin plant works 22,5000 direct labor-hours during a month. Estimate the expected overhead cost for the month using the cost formulas developed above with: a. The high-low method. b. The least-squares regression method. c. The scattergraph method [ read the expected costs directly off the graph prepared in (3) above] 5. Of the three proposed methods, explain which one the Ramon Company should use to estimate monthly overhead costs in the Franklin plant. Explain why the other methods are less m desirable