Variable and fixed cost analysis; high-low methodMiller Minerals Co. manufactures a product that requires the use ofa considerable amount of natural gas to heat it to a desired tem-perature. The process requires a constant level of heat, so the fur-naces are maintained at a set temperature for 24 hours a day.Although units are not continuously processed, managementdesires that the variable cost be charged directly to the productand the fixed cost to the factory overhead. The following datahave been collected for the year:Units Cost2,400 $4,4002,300 4,3002,200 4,2002,000 4,000 October.1,800 3,800November1,900 3,900 December..January .........FebruaryMarch.....AprilMay.JuneJuly.August.September.UnitsCost2,200 4,4002,1004,1002,0003,8001,400 3,4501,9003,7001,8004,050Required:1. Separate the variable and fixed elements, using the high-lowmethod.2. Determine the variable cost to be charged to the product forthe year. (Hint. First determine the number of annual unitsproduced.)3. Determine the fixed cost to be charged to factory overhead forthe year.

High-low method is one of the techniques that is used to separate fixed and variable components from…

Required: 1. Separate the variable and fixed elements, using the high-lo method. 2. Determine the variable cost to be charged to the product f the year. (Hint. First determine the number of annual uni produced.) 3. Determine the fixed cost to be charged to factory overhead f the var

Required: 1. Separate the variable and fixed elements, using the high-lo method. 2. Determine the variable cost to be charged to the product f the year. (Hint. First determine the number of annual uni produced.) 3. Determine the fixed cost to be charged to factory overhead f the var

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter4: Accounting For Factory Overhead

Section: Chapter Questions

Problem 2P: Miller Minerals Co. manufactures a product that requires the use of a considerable amount of natural...

See similar textbooks

Similar questions

Variable and Fixed Costs What follows are a number of resources that are used by a manufacturer of futons. Assume that the output measure or cost driver is the number of futons produced. All direct labor is paid on an hourly basis, and hours worked can be easily changed by management. All other factory workers are salaried. a. Power to operate a drill (to drill holes in the wooden frames of the futons) b. Cloth to cover the futon mattress c. Salary of the factory receptionist d. Cost of food and decorations for the annual Fourth of July party for all factory employees e. Fuel for a forklift used to move materials in a factory f. Depreciation on the factory g. Depreciation on a forklift used to move partially completed goods h. Wages paid to workers who assemble the futon frame i. Wages paid to workers who maintain the factory equipment j. Cloth rags used to wipe the excess stain off the wooden frames Required: Classify the resource costs as variable or fixed.
Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins of 300 and 600, respectively. Assume initially that Patz can sell all that is produced of either component. Part A requires two hours of assembly, and B requires five hours of assembly. The firm has 300 assembly hours per week. Required: 1. Express the objective of maximizing the total contribution margin subject to the assembly-hour constraint. 2. Identify the optimal amount that should be produced of each machine part and the total contribution margin associated with this mix. 3. What if market conditions are such that Patz can sell at most 75 units of Part A and 60 units of Part B? Express the objective function with its associated constraints for this case and identify the optimal mix and its associated total contribution margin.
Miller Minerals Co. manufactures a product that requires the use of a considerable amount of natural gas to heat it to a desired temperature. The process requires a constant level of heat, so the furnaces are maintained at a set temperature for 24 hours a day. Although units are not continuously processed, management desires that the variable costbe charged directly to the product and the fixed cost to the factory overhead. The following data have been collected for the year:
Theory of constraints, throughput margin, and relevant costs. Washington Industries manufactures electronic testing equipment. Washington also installs the equipment at customers’ sites and ensures that it functions smoothly. Additional information on the manufacturing and installation departments is as follows (capacities are expressed in terms of the number of units of electronic testing equipment): Washington manufactures only 250 units per year because the installation department has only enough capacity to install 250 units. The equipment sells for $55,000 per unit (installed) and has direct material costs of $30,000. All costs other than direct material costs are fixed. The following requirements refer only to the preceding data. There is no connection between the requirements.
The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division. This casing is also sold to external customers for $32 per unit. Variable costs for the casing are $19 per unit, and fixed cost is $4 per unit. Cotwold executives would like for the Molding Division to transfer 15,000 units to the Assembly Division at a price of $24 per unit. Assume that the Molding Division has enough excess capacity to accommodate the request. Required: Should the Molding Division accept the $24 transfer price proposed by management? Calculate the effect on the Molding Division’s net income if it accepts the $24 transfer price
Standard Product CostsDeerfield Company manufactures product M in its factory. Production of M requires 2 pounds of material P, costing $12 per pound and 0.5 hour of direct labor costing, $18 per hour. The variable overhead rate is $16 per direct labor hour, and the fixed overhead rate is $20 per direct labor hour. What is the standard product cost for product M? Direct material Answer Direct labor Answer Variable overhead Answer Fixed overhead Answer Standard product cost per unit Answer
DIFFERENTIAL ANALYSIS AND DECISION MAKING Heavy Metals produces various electronics items for use in heavy machines. The company usually produces all the necessary parts for its products. However, an outside supplier has recently offered to sell a specialized part – Part H – to the company for $31 per unit. To evaluate this offer, the company has gathered the following information regarding its own cost of producing the Part H internally: Per unit 15,000 units per year Direct materials 12 180,000 Direct Labour 12 180,000 Variable manufacturing overhead 3 45,000 Fixed manufacturing overhead (one-third belongs to supervisory salaries; two-thirds belongs to the depreciation of special equipment) 6 90,000 Required (show your calculation): i) Assuming that the company has no alternative use for the facilities now…
Cost-plus and market-based pricing. (CMA, adapted) Precision Laboratories evaluates the reaction of materials to extreme increases in temperature. Much of the company’s early growth was attributable to government contracts, but recent growth has come from expansion into commercial markets. Two types of testing at Precision are Heat Testing (HTT) and Arctic-Condition Testing (ACT). Currently, all of the budgeted operating costs are collected in a single overhead pool. All of the estimated testing-hours are also collected in a single pool. One rate per test-hour is used for both types of testing. This hourly rate is marked up by 40% to recover administrative costs and taxes and to earn a profit. Jeff Boone, Precision’s controller, believes that there is enough variation in the test procedures and cost structure to establish separate costing rates and billing rates at a 40% markup. He also believes that the inflexible rate structure the company is currently using is inadequate in today’s…
Hall, Incorporated manufactures two components, Standard and Ultra, that are designed for the same function, but are made of different metals for operational performance reasons. The metal used in Standard is easy to work with and there are few quality issues or reworking required on the machines. The metal used in Ultra is more difficult to work with and often needs additional machine time and rework. Data on expected operations and direct costs for the next fiscal year follow: Standard Ultra Total Units produced 37,000 11,000 48,000 Direct labor-hours used 111,000 22,500 133,500 Machine-hours used 18,500 22,500 41,000 Direct materials costs $ 2,845,000 $ 2,886,000 $ 5,731,000 Direct labor costs 2,520,000 855,000 3,375,000 The planning process team at Hall, Incorporated has estimated the following manufacturing overhead costs for the next fiscal year: Account Amount Administration $ 825,400 Engineering 2,537,000 Machine operation and maintenance 820,000…
Activity-Based Supplier Costing Bowman Company manufactures cooling systems. Bowman produces all the parts necessary for its product except for one electronic component, which is purchased from two local suppliers: Manzer Inc. and Buckner Company. Both suppliers are reliable and seldom deliver late; however, Manzer sells the component for $89 per unit, while Buckner sells the same component for $86. Bowman purchases 80% of its components from Buckner because of its lower price. The total annual demand is 4,000,000 components. To help assess the cost effect of the two components, the following data were collected for supplier-related activities and suppliers: Required: 1. Calculate the cost per component for each supplier, taking into consideration the costs of the supplier-related activities and using the current prices and sales volume. ( Note : Round the unit cost to two decimal places.) 2. Suppose that Bowman loses $4,000,000 in sales per year because it develops a poor…
Activity-Based Supplier Costing Bowman Company manufactures cooling systems. Bowman produces all the parts necessary for its product except for one electronic component, which is purchased from two local suppliers: Manzer Inc. and Buckner Company. Both suppliers are reliable and seldom deliver late; however, Manzer sells the component for $89 per unit, while Buckner sells the same component for $86. Bowman purchases 80% of its components from Buckner because of its lower price. The total annual demand is 4,000,000 components. To help assess the cost effect of the two components, the following data were collected for supplier-related activities and suppliers: I. Activity Data Activity Cost Inspecting components (sampling only) $630,000 Reworking products (due to failed component) 7,770,000 Warranty work (due to failed component) 8,770,000 II. Supplier Data Manzer Inc. Buckner Company Unit purchase price $89 $86 Units purchased 800,000 3,200,000 Sampling hours*…
Activity-Based Supplier Costing Bowman Company manufactures cooling systems. Bowman produces all the parts necessary for its product except for one electronic component, which is purchased from two local suppliers: Manzer Inc. and Buckner Company. Both suppliers are reliable and seldom deliver late; however, Manzer sells the component for $89 per unit, while Buckner sells the same component for $86. Bowman purchases 80% of its components from Buckner because of its lower price. The total annual demand is 4,000,000 components. To help assess the cost effect of the two components, the following data were collected for supplier-related activities and suppliers: I. Activity Data Activity Cost Inspecting components (sampling only) $605,000 Reworking products (due to failed component) 7,570,000 Warranty work (due to failed component) 10,270,000 II. Supplier Data Manzer Inc. Buckner Company Unit purchase price $89 $86 Units purchased 800,000 3,200,000 Sampling hours*…