August 40,000 September 70,000 October 72,000 In addition , the cost of goods sold rate is 70 % and the desired inventory level is 30 % of next month ' s cost of sales . Prepare a purchases budget for July through September . 3 . Question : ( TCO 3 ) Patrick Ross , the president of Ross ' s Wild Game Company , has asked for information about the cost behavior of manufacturing overhead costs . Specifically , he wants to know how much overhead cost is fixed and how much is variable . The following data are the only records available : Month Machine-hours Overhead Costs February 1,700 $ 20,500 March 2,800 22,250 April 1,000 19,950 May 2,500 21,500 June 3,500 23,950 Using the high-low method , determine the overhead cost equation . Use machine-hours as your cost driver . 4 . Question : ( TCO 5 ) Kirkland Company manufactures a part for use in its production of hats . When 10,000 items are produced , the costs per unit are : Direct materials $ 0.60 Direct manufacturing labor 3.00 Variable manufacturing overhead 1.20 Fixed manufacturing overhead 1.60 Total $ 6.40 Mike Company has offered to sell to Kirkland Company 10,000 units of the part for $ 6.00 per unit . The plant facilities could be used to manufacture another item at a savings of $ 9,000 if Kirkland accepts the offer . In addition , $ 1.00 per unit of fixed manufacturing overhead on the original item would be eliminated . a . What is the relevant per unit cost for the original part ? b . Which alternative is best for Kirkland Company ? By how much ? =========================================