CONNECT ONLINE ACCESS F/MANAGERIAL ACC.
6th Edition
ISBN: 9781264445356
Author: Noreen
Publisher: MCG
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Chapter 2A, Problem 2A.8P
High-Low Method; Predicting Cost LO2—10
Nova Company’s total overhead cost at various levels of activity are presented below:
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:
Nova Company’s management wants to break down the maintenance cost into its variable and fixed cost elements.
Required:
- 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.)
- Using the high-low method, estimate a cost formula for maintenance in the form
- Express the company’s total overhead cost in the form
- What total overhead cost would you expect to be incurred at an activity level of 75,000 machine-hours?
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overhead cost information for one unit of this product is presented below: Required: 1. Calculate the fixed overhead application rate per machine hour using (a) budgeted output, (b)
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in requirement 1 ? (Round your answers to 2 decimal places.) 3. What is the total overhead varlance for the year when the overhead application rate per machine hour is determined under
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intermediate calculations. Round your answers to the nearest whole dollar…
Determine fixed and variable costs using the high-low method and prepare graph.
E2.26 (LO 3) The controller of Furgee Industries has collected the following monthly expense data for use in analyzing the cost behaviour of maintenance costs.
Total Maintenance Costs
Total Machine Hours
Month
January
February
March
April
May
June
$2,500
3,000
3,600
4,500
3,200
4,900
300
350
500
690
400
700
Instructions
a. Determine the fixed and variable cost components using the high-low method.
b. Prepare a graph showing the behaviour of maintenance costs, and identify the fixed and variable cost components. Use 100-hour increments and $1,000 cost
increments.
Characteristics of Production Process, Cost Measurement
Vince Melders, of EcoScape Company, designs and installs custom lawn and garden irrigation systems for homes and businesses throughout the state.
Each job is different, requiring different materials and labor for installing the systems. EcoScape estimated the following for the year:
Number of direct labor hours
6,720
Direct labor cost
$67,200
Overhead cost
$50,400
During the year, the following actual amounts were experienced:
Number of direct labor hours
6,045
Direct labor incurred
$66,495
Overhead incurred
$50,500
Required:
1. Should EcoScape use process costing or job-order costing?
2. If EcoScape uses a normal costing system and overhead is applied on the basis of direct labor hours,
What is the overhead rate? Round your answer to the nearest cent.
per direct labor hour
Chapter 2A Solutions
CONNECT ONLINE ACCESS F/MANAGERIAL ACC.
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