Problem - Bob Jones owns a catering company that stages banquets and parties for both individuals and companies. The business is seasonal, with heavy demand during the summer months and year-end holidays and light demand at other times. Bob has gathered the following cost information from the past year:
|
Month
|
Labor Hours
|
Overhead Costs
|
|
January
|
2,500
|
$54,217
|
|
February
|
2,946
|
61,661
|
|
March
|
3,003
|
63,220
|
|
April
|
4,215
|
67,860
|
|
May
|
4,695
|
67,704
|
|
June
|
5,653
|
76,668
|
|
July
|
6,623
|
74,236
|
|
August
|
7,500
|
79,364
|
|
September
|
7,222
|
75,480
|
|
October
|
4,527
|
71,400
|
|
November
|
3,148
|
65,856
|
|
December
|
6,764
|
73,724
|
|
Total
|
58,796
|
$831,390
|
a. Using the high-low method, compute the overhead cost per labor hour and the fixed overhead cost per month.
b. Bob has booked 2,946 labor hours for the coming month. How much overhead should he expect to incur?