Management Accounting Problem Sets

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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
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