Precision Pumps and Valves Ltd. manufactures hydraulic components for mobile industrial equipment, such as excavators. The firm's production volume fluctuates from month to month, causing sharp swings in the amount of resources that must be acquired each month (e.g., materials purchased, machinery leased). Management would like to better understand the behaviour of its monthly overhead costs. Because of the machinery-intensive nature of the firm's production, the firm uses machine hours as its overhead cost driver. The monthly data for 2006 are as follows:
|
Month (2006)
|
Machine Hours
|
Overhead Cost
|
|
January
|
22,000
|
$ 620,000
|
|
February
|
10,000
|
400,000
|
|
March
|
13,000
|
465,000
|
|
April
|
28,000
|
685,000
|
|
May
|
17,000
|
540,000
|
|
June
|
24,000
|
640,000
|
|
July
|
14,000
|
300,000
|
|
August
|
20,000
|
600,000
|
|
September
|
30,000
|
675,000
|
|
October
|
12,000
|
440,000
|
|
November
|
26,000
|
660,000
|
|
December
|
18,000
|
570,000
|
Under the high-low method, variable cost per unit is: