MANAGERIAL ACCOUNTING W/CONNECT
15th Edition
ISBN: 9781259732454
Author: Garrison
Publisher: MCGRAW-HILL CUSTOM PUBLISHING
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 2, Problem 20P
PROBLEM 2-20 High-Low Method; Predicting Cost [L02-4, L02-5]
Nova Company’s total overhead cost at various levels of activity are presented below:
| Month | MachineHours | Total Overhead Cost |
| April …. | 70,000 | $198,000 |
| May …. | 60,000 | $174,000 |
| June …. | 80,000 | $222,000 |
| July …. | 90,000 | $246,000 |
Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 60,000 machine-hour level of activity is:
| Utilities (variable) …. | $48,000 |
| Supervisory salaries (fixed) ... | 21,000 |
| Maintenance (mixed) | 105,000 |
| Total overhead cost | $174,000 |
Nova Company’s management wants to break down the maintenance cost into its variable and fixed cost elements.
Required:
1. Estimate how much of the $246,000 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $246,000 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs!)
2. Using the high-low method, estimate a cost formula for maintenance.
3. Express the company’s total overhead cost in the linear equation form Y = a + bX.
4. What total overhead cost would you expect to be incurred at an activity level of 75,000 machine-hours?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
PROBLEM I
ABC Company's total overhead costs at various levels of activity are presented below:
March
April
May
June.
Machine Hours Total Overhead Costs
$216,800
$194,000
$239,600
$262,400
60,000
50,000
70,000
80,000
Assume that the overhead costs above consist of utilities, supervisory salaries, and
maintenance. At the 50,000 machine-hour level of activity these costs are:
Utilities (V).
Supervisory salaries (F).
Maintenance (M)..
Total overhead cost
V = Variable; F = Fixed; M = Mixed
The company wants to break down the maintenance cost into its basic variable and fixed
cost elements.
Required:
$ 54,000
62,000
78.000
$194.000
a. Estimate the maintenance cost for June.
b.
Use the high-low method to estimate the cost formula for maintenance cost.
c. Estimate the total overhead cost at an activity level of 55,000 machine hours.
Nova Company's total overhead cost at various levels of activity are presented below
Total
Overhead
Machine-
Month
Hours
Cost
April
May
June
52,000
42,000
62,000
72,000
$203,860
$181,060
$226,660
$249,460
July
Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at
the 42,000 machine-hour level of activity is:
Utilities (variable)
Supervisory salaries (fixed)
Maintenance (mixed)
Total overhead cost
S
50,400
67,000
63.660
181,060
Nova Company's management wants to break down the maintenance cost into its variable and fixed cost elements
Required:
1. Estimate how much of the $249,460 of overhead cost in July was maintenance cost. (Hint: To do this, it may be helpful to first
determine how much of the $249,460 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs!)
(Do not round intermediate calculations.)
Maintenance cost in July
2. Using the high-low method,…
Paragraph
Styles
Acct 201 Practice Problems (Ch.2)
Question 1:
Nizwa Company estimates that annual manufacturing overhead costs will be OMR 900,000.
Estimated annual operating activity bases are direct labor cost OMR 500,000, direct labor hours
50,000, and machine hours 100,000.
Instructions
Compute the predetermined overhead rate for each activity base.
Chapter 2 Solutions
MANAGERIAL ACCOUNTING W/CONNECT
Ch. 2.A - Prob. 1ECh. 2.A - Prob. 2ECh. 2.A - Prob. 3PCh. 2.A - Prob. 4PCh. 2.A - Prob. 5CCh. 2.B - Prob. 1ECh. 2.B - Prob. 2ECh. 2.B - Prob. 3PCh. 2.B - Prob. 4PCh. 2 - Prob. 1Q
Ch. 2 - Define the following: (a) direct materials, (b)...Ch. 2 - Explain the difference between a product cost and...Ch. 2 - Distinguish between (a) a variable cost, (b) a...Ch. 2 - Prob. 5QCh. 2 - Define the following terms: (a) cost behavior and...Ch. 2 - What is meant by an activity base when dealing...Ch. 2 - Managers often assume a strictly linear...Ch. 2 - Distinguish between discretionary fixed costs and...Ch. 2 - Does the concept of the relevant range apply to...Ch. 2 - What is the major disadvantage of the high-low...Ch. 2 - Prob. 12QCh. 2 - Prob. 13QCh. 2 - What is the difference between a traditional...Ch. 2 - Prob. 15QCh. 2 - Prob. 16QCh. 2 - Prob. 17QCh. 2 - Prob. 1AECh. 2 - Prob. 2AECh. 2 - L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - Prob. 1F15Ch. 2 - L012, L013, L014, L015, L016 Martinez Company’s...Ch. 2 - L01–1, L01–2, L01–3, L01–4, L01–5, L01–6
Martinez...Ch. 2 - L01–1, L01–2, L01–3, L01–4, L01–5, L01–6
Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6
Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6
Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6
Martinez...Ch. 2 - L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6
Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6
Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6
Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6
Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6
Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6
Martinez...Ch. 2 - L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - EXERCISE 1—1 Identifying Direct and Indirect Costs...Ch. 2 - EXERCISE 1-2 Classifying Manufacturing Costs LO1-2...Ch. 2 - EXERCISE 1-3 Classifying Costs as Product or...Ch. 2 - EXERCISE 14 Fixed and Variable Cost Behavior LO14...Ch. 2 - Prob. 5ECh. 2 - EXERCISE 1—6 Traditional and Contribution Format...Ch. 2 - Prob. 7ECh. 2 - Prob. 8ECh. 2 - Prob. 9ECh. 2 - Prob. 10ECh. 2 - Prob. 11ECh. 2 - EXERCISE 1-12 Product and Period Cost Flows LO1–3...Ch. 2 - Prob. 13ECh. 2 - EXERCISE 2-14 High-Low Method: Predicting Cost...Ch. 2 - Prob. 15ECh. 2 - Prob. 16PCh. 2 - Prob. 17PCh. 2 - PROBLEM 1-18 Direct and Indirect Costs; variable...Ch. 2 - Prob. 19PCh. 2 - PROBLEM 2-20 High-Low Method; Predicting Cost...Ch. 2 - PROBLEM 2-21 Cost Classification [L02-1, L02-3,...Ch. 2 - Prob. 22PCh. 2 - Prob. 23PCh. 2 - Prob. 24PCh. 2 - Prob. 25PCh. 2 - Prob. 26CCh. 2 - Prob. 27C
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Question 6: Your company currently produces a range of three products, D, E, and F to which the following details relate for Period 2. D E F Production (units) 1,500 2,500 14,000 Material cost per unit Br. 18 Br. 10 Br. 20 Labor hours per unit 1 3 2 Machine hours per unit 3 2 6 Labor costs are Br. 8 per hour and production overheads are currently absorbed in the conventional system by reference to machine hours. Total production overheads for Period 2 have been analyzed as follows: Set-up cost 327,250 Handling cost 187,000 Machine cost 140,250 Inspection cost 280,500 935,000 Calculate the cost per unit for each product using conventional The introduction of an ABC is being considered and to that end the following volume…arrow_forwardok nt ences May June July 37,000 57,000 67,000 Assume the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these c 37,000 machine-hour level of activity is: Utilities (variable) Supervisory salaries (fixed) Maintenance (mixed) Total overhead cost Required 1 Nova Company's management wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the $234,760 of overhead cost in July was maintenance cost. (Hint: To do this, it may be helpful to determine how much of the $234,760 consisted of utilities and supervisory salaries. Think about the behavior of variable costs.) 2. Using the high-low method, estimate a cost formula for maintenance in the form Y = a +bX. 3. Express the company's total overhead cost in the form Y = a +bX. 4. What total overhead cost would you expect at an activity level of 42,000 machine-hours? $ 154,360 $ 207,960 $ 234,760 Complete this question by…arrow_forwardEXERCISE 1 XYZ Company has identified the following overhead activities, costs, and activity drivers for the coming year: Activity Expected Cost Activity Driver Activity Capacity $45,000 80,000 15,000 30,000 50,000 Number of moves Material-handling costs.. Machine costs... 450 Machine hours.. Number of orders. Number of parts.. Number of setups.. 20,000 Order costs.. 750 Receiving costs.. Setup costs.. 50,000 250 Assume that each activity corresponds to a process. XYZ's normal activity is 5,000 direct labor hours. The following two jobs were completed during March: Job X-1 Job Y-4 $1,500 $750 Direct materials $2,000 $750 Direct labor ($15 per hour)... Units completed... Number of moves. Machine hours.. Number of orders. Number of parts. Number of setups.. 200 200 3 6 125 75 3 12 200 800 1 4 Required: 1. Determine the unit cost for each job using direct labor hours to apply overhead.arrow_forward
- Problem 3-11 (Algo) T-Account Analysis of Cost Flows [LO3-2, LO3-3, LO3-4] Selected T-accounts of Moore Company are given below for the just completed year: Raw Materials Bal. 1/1 35,000 Credits ? Debits 160,000 Bal. 12/31 45,000 Manufacturing Overhead Debits 188,400 Credits ? Work in Process Bal. 1/1 40,000 Credits 530,000 Direct materials 110,000 Direct labor 210,000 Overhead 218,400 Bal. 12/31 ? Factory Wages Payable Debits 225,000 Bal. 1/1 19,000 Credits 220,000 Bal. 12/31 14,000 Finished Goods Bal. 1/1 60,000 Credits ? Debits ? Bal. 12/31 90,000 Cost of Goods Sold Debits ? Required: 1. What was the cost of raw materials used in production during the year? 2. How much of the materials in (1) above consisted of indirect materials? 3. How much of the factory labor cost for the year consisted of indirect labor? 4. What was the cost of…arrow_forwardGiven the following cost and activity observations for George Company’s utilities, use the high-low method to determine George’s variable utilities cost per machine hour. Cost Machine Hours May $16,500 105,000 June 18,000 120,000 July 16,000 100,000 August 17,500 117,000 a. $10.00 b. $0.10 c. $100.00 d. $1.00arrow_forward--/1 Question 23 View Policies Current Attempt in Progress upport The predetermined overhead rate for Crane Company is $5, comprised of a variable overhead rate of $3 and a fixed rate of $2. The amount of budgeted overhead costs at normal capacity of $150000 was divided by normal capacity of 30000 direct labor hours, to arrive at the predetermined overhead rate of $5. Actual overhead for June was $14208 variable and $8640 fixed, and 2400 units were produced. The direct labor standard is 2 hours per unit produced. The total overhead variance is O $1152 F. O $2880 U. O $2880 F. O $1152 U. ch hp ins pr f12 f11 f10 f9 f8 f6 f7 f5 & 80 %3D 60 9. T.arrow_forward
- activity car pool est. overhead cost expected activity A B total #1 $29,200 1000 500 1500 #2 $40,000 200 800 1000 #3 $180,000 600 5400 6000 Chibucos Company has two products: A and B. The annual production and sales level of Product A is 9,094 units. The annual production and sales level of Product B is 15,826. The company uses activity-based costing and has prepared the following analysis showing the estimated total cost and expected activity for each of its three activity cost pools. The overhead cost per unit of Product A under activity-based costing is closest to: options: 1. $1.83 2. $1.98 3. $5.00 4. $10.00arrow_forwardQUESTION 2 A factory's records show the following costs and outputs for the last five months: Month |January February March Cost (£) 17,125 Output 650 17,800 940 April May 18,650 17,980 18,760 1,260 990 1,150 Using the High - Low method to calculate, what wouid the cost be of producing 1,000 units? O a. E15,500.00 Ob.E17,958.40 Oc £18,000.00 d. E18,269.50arrow_forward5 Vista Company reports the following information. Direct materials Direct labor Variable overhead Fixed overhead Units produced Compute its product cost per unit under absorption costing. Multiple Choice $76.00. $152.00. $171.00. $ 44 per unit 64 per unit $ 44 per unit $ 380,000 per year 20,000 units < Prarrow_forward
- Month April May June Machine-Hours 63, eee 53,000 73,00e 84,e00 Cost $115, eee $138, 000 $326, 000 $193,000 July Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 53,000-machine-hour level of activity in May is as follows Utilities (variable) Supervisory salaries (fixed) Maintenance (mixed) $ 25,000 28, 000 85,000 $138, 000 Total overhead cost The company wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the $193,000 of overhead cost in July was maintenance cost. (Hint To do this, first determine how much of the $193,000 consisted of utilities and supervisory salaries. Think about the behaviour of variable and fixed costs within the relevant range ) (Round the "Variable cost per unit" to 2 decimal places.) 11,623 Maintenance cost in Julyarrow_forwardQuestion Content Area Compute conversion costs given the following data: direct materials, $376,200; direct labor, $200,400; factory overhead, $179,400 and selling expenses, $48,400. a. $555,600 b. $131,000 c. $756,000 d. $379,800arrow_forwardQuestion # 1 Standard and the actual costs for direct materials and direct labor are given as under: Standard costs Direct materials 8,000 units at total direct material costs Rs. 40,000 Direct labor: 7,000 hours at Rs. 6 per hour Actual costs Direct materials 8,500 units at Rs. 4.5 per unit Direct labor: 6,500 hours at Rs. 6.25 per hour Required c. Entries in general journal to record the above information d. What do you realize whether the overall variation is in favorable or unfavorable?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Cost Classifications - Managerial Accounting- Fixed Costs Variable Costs Direct & Indirect Costs; Author: Accounting Instruction, Help, & How To;https://www.youtube.com/watch?v=QQd1_gEF1yM;License: Standard Youtube License