# Management Accounting Problem Sets

1579 Words Feb 3rd, 2018 6 Pages
Solution
1
Machine Hour
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
=\$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…