Question - Selected data about Ruby Company's manufacturing operations at two levels of activity are given below:
Number of units produced 10,000 15,000
Total manufacturing costs $157,000 $225,000
Direct material cost per unit $4 $4
Direct labor cost per unit $6 $6
Required:
a. Using the high-low method, estimate the cost formula for manufacturing overhead. Assume that both direct material and direct labor are variable costs.
b. What is the purpose of knowing the cost formula?