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2. Using the high-low method, estimate a cost formula for maintenance. Y = X 3. What total overhead costs would you expect the company to incur at an operating level of 87,000 machine-hours? Total factory overhead costs

2. Using the high-low method, estimate a cost formula for maintenance. Y = X 3. What total overhead costs would you expect the company to incur at an operating level of 87,000 machine-hours? Total factory overhead costs

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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2. Using the high-low method, estimate a cost formula for maintenance. Y= X 3. What total overhead costs would you expect the company to incur at an operating level of 87,000 machine-hours? Total factory overhead costs
Transcribed Image Text:2. Using the high-low method, estimate a cost formula for maintenance. Y= X 3. What total overhead costs would you expect the company to incur at an operating level of 87,000 machine-hours? Total factory overhead costs
Problem 3-17 High-Low Method; Predicting Cost [LO1, LO2] Colby Limited is a manufacturing company whose total factory overhead costs fluctuate somewhat 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: Machine-hours Total factory overhead costs Indirect materials (variable) Rent (fixed) Maintenance (mixed) Total factory overhead costs Level of Activity Low 82,000 $35,230,000 The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 82,000 machine-hours level of activity as follows: High 92,000 $37,380,000 Maintenance cost $12,546,000 13,600,000 9,084,000 $35,230,000 For planning purposes, the company wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the factory overhead cost of $37,380,000 at the high level of activity consists of maintenance cost.
Transcribed Image Text:Problem 3-17 High-Low Method; Predicting Cost [LO1, LO2] Colby Limited is a manufacturing company whose total factory overhead costs fluctuate somewhat 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: Machine-hours Total factory overhead costs Indirect materials (variable) Rent (fixed) Maintenance (mixed) Total factory overhead costs Level of Activity Low 82,000 $35,230,000 The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 82,000 machine-hours level of activity as follows: High 92,000 $37,380,000 Maintenance cost $12,546,000 13,600,000 9,084,000 $35,230,000 For planning purposes, the company wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the factory overhead cost of $37,380,000 at the high level of activity consists of maintenance cost.
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