Answered: Charlie Corporation's managers in the…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter4: Job Order Costing

Section: Chapter Questions

Problem 2PB: Rulers Company is a neon sign company that estimated overhead will be $60,000, consisting of 1,500...

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Question

Charlie Corporation's managers in the stamping department have been studying the overhead cost and the relationship with machine hours. The following are data from the most recent 12 months.

Month	Overhead	Machine hours
January	5,030	2,730
February	1,600	600
March	7,210	3,403
April	4,560	2,200
May	6,880	3,411
June	6,520	2,586
July	6,230	3,364
August	5,570	2,411
September	7,728	3,960
October	5,810	2,897
November	4,580	2,207
December	6,010	2,864

The manager of the department has requested a regression analysis of these two variables. The staff person performing the analysis decided to exclude February. She observed the volume of activity was very low for that month because of two factors: a severe flue outbreak and an electrical fire that disrupted operations for about 10 working days.

Required:

a. Using the high-low point method, compute the fixed cost.

b. Using the high-low point method, how much are the estimated overhead costs for 3,000 machine hours?

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