# Management Accounting Problem Sets

Good Essays
Running Head: MANAGEMENT ACCOUNTING Management Accounting Solution to Problem 2-17 Echeverria SA "Estimate how much of the factory overhead cost of 312,000 pesos at the high level of activity consists of maintenance cost". Solution 1 Machine Hour Total Factory Overhead High 80,000 \$312,000 Low 60,000 \$274,000 Difference (80,000 - 60,000 ) =20,000 (\$312,000 \$274,000 =\$ 38,000 Total Variable Cost Per Machine Hour =\$ 38,000/20,000 =\$ 1.90 Total Fixed Cost at 60,000 hours \$274,000- (60,000*1.90) =\$ 160,000 Variable Cost Per Machine Hour for indirect Material 90000/60000 =\$1.50 Variable cost per machine hour for maintenance \$ 1.90 \$ 1.50 =\$ 0.40 Fixed Cost for Maintenance \$160,000 -\$130,000 \$30,000 2. "Using the high-low method, estimate a cost formula for maintenance" Maintenance cost at high level of activity =\$30,000 + ((\$1.90 - 1.50) x 80,000) \$ 62,000 2 Y = \$30,000 + 0.40 X "What total overhead costs would you expect the company to incur at an operating level of 65,000 machine-hours"? 3 Total Factory Overhead cost =\$160,000 + (\$1.90 x 65,000) \$ 283,500 Solution to Problem 2-19 Sebolt Wire Company "Using the high-low method, estimate a cost formula for power cost. Express the formula in the form Y 5 a 1bX". Number of Ingots Power Cost High Activity Level May 130 \$6,000 Low Activity Level October 40 \$2,400 Change 90 \$3,600 Variable Cost Change in Power Costs / Change in No of Ingots