MANAGERIAL ACCT.F/MANAGERS>CUSTOM<
4th Edition
ISBN: 9781307090147
Author: Noreen
Publisher: MCG/CREATE
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Chapter 2, Problem 2.17P
High-Low Method; Predicting Cost [LO 2-4, LO 2-5]
Sawaya Co., Ltd., of Japan is a manufacturing company whose total factory
![Chapter 2, Problem 2.17P, High-Low Method; Predicting Cost [LO 2-4, LO 2-5] Sawaya Co., Ltd., of Japan is a manufacturing , example 1](http://dev-ingestion-image-output.s3-website-us-east-1.amazonaws.com/9781259578540/Chapter-2/images/html_q_78540-2-2.17p_1.png)
The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 50,000-hour level of activity as follows:
![Chapter 2, Problem 2.17P, High-Low Method; Predicting Cost [LO 2-4, LO 2-5] Sawaya Co., Ltd., of Japan is a manufacturing , example 2](http://dev-ingestion-image-output.s3-website-us-east-1.amazonaws.com/9781259578540/Chapter-2/images/html_q_78540-2-2.17p_2.png)
To have data available for planning, the company wants to break down the maintenance cost into its variable and fixed cost elements.
Required:
- Estimate how much of the $17,7625,7000
factory overhead cost at the high level of activity consists of maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $17,625,000 consists of indirect materials and rent. Think about the behavior of variable and fixed costs!) - Using the high-low method. estimate a cost formula for maintenance.
- What total factory overhead costs would you expect the company to incur at an operating level of 70,000 direct labor-hours?
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QUESTION 4.
Etsi GR is a Greek manufacturing company whose total factory overhead costs fluctuate from year to year according to the number of machine- hours worked in its production facility.
These costs at HIGH and LOW levels of activity over recent years are given below:
High Low
Machine –hours 80,000 60,000
Total overhead costs €312,000 €274,000
The total overhead costs ABOVE AT 60,000 machine hours (Low point) are made up of the following costs:
Indirect Materials (VARIABLE) € 90,000
Rent (FIXED) 130,000
Maintenance (MIXED) 54,000
274,000
B)Use the HIGH LOW method, break down the Maintenance costs into b(variable cost per machine hour) and a (total fixed maintenance cost)
PROBLEM 2
Elsa, Inc., has only variable costs and fixed costs. A review of the company's records disclosed
that when 100,000 units were produced, fixed manufacturing costs amounted to $200,000 and
the cost per unit manufactured totaled $5. On the basis of this information, how much cost
would the firm anticipate at an activity level of 97,000 units?
A. $485,000.
B. $491,000.
C. $494,000.
D. $500,000.
Choose the letter of answer:
Hilby, Inc., uses the high-low method to analyze cost behavior. The company observed that at 12,000 machine hours of activity, total maintenance costs averaged P7.00 per hour. When activity jumped to 15,000 machine hours, which was still within the relevant range, the average cost per machine hour totaled P6.40. On the basis of this information, the variable cost per machine hour was:
a. P4.00.b. P6.40.c. P6.70.d. P7.00.
Chapter 2 Solutions
MANAGERIAL ACCT.F/MANAGERS>CUSTOM<
Ch. 2 - Prob. 2.1QCh. 2 - Prob. 2.2QCh. 2 - Prob. 2.3QCh. 2 - Prob. 2.4QCh. 2 - Prob. 2.5QCh. 2 - Prob. 2.6QCh. 2 - Prob. 2.7QCh. 2 - Prob. 2.8QCh. 2 - Prob. 2.9QCh. 2 - Prob. 2.10Q
Ch. 2 - Prob. 2.11QCh. 2 - Give the general formula for a mixed cost. Which...Ch. 2 - What is meant by the term least-squares...Ch. 2 - Prob. 2.14QCh. 2 - Prob. 2.15QCh. 2 - Prob. 2.16QCh. 2 - Prob. 2.17QCh. 2 - Prob. 1AECh. 2 - Prob. 1TF15Ch. 2 - Prob. 2.1ECh. 2 - Prob. 2.2ECh. 2 - Prob. 2.3ECh. 2 - Prob. 2.4ECh. 2 - High-Low Method (LO 2-5) The Cheyenne Hotel in Big...Ch. 2 - Prob. 2.6ECh. 2 - Prob. 2.7ECh. 2 - Cost Behavior; High-Low Method [LO 2-4, LO 2-5]...Ch. 2 - Cost Terminology for Manufacturers [LO 2-2, LO...Ch. 2 - Prob. 2.10ECh. 2 - Prob. 2.12ECh. 2 - Prob. 2.13ECh. 2 - Prob. 2.15ECh. 2 - Cost Behavior; High-Low Method; Contribution...Ch. 2 - High-Low Method; Predicting Cost [LO 2-4, LO 2-5]...Ch. 2 - Prob. 2.18PCh. 2 - Prob. 2.19PCh. 2 - High-Low Method; Predicting Cost [LO 2-4, LO 2-5]...Ch. 2 - Prob. 2.21PCh. 2 - High-Low Method; Contribution Format Income...Ch. 2 - Scattergraph Analysis; Selection of an Activity...
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