Adriana Corporation manufactures football equipment. In planning for next year, the managers want to understand the relation between activity and overhead costs. Discussions with the plant supervisor suggest that overhead seems to vary with labor hours, machine hours, or both. The following data were collected from last year’s operations. Month Labor-Hours Machine-Hours Overhead costs 1 720 1,355 $ 102,644 2 720 1,411 103,842 3 675 1,527 109,938 4 750 1,462 108,297 5 785 1,582 116,102 6 755 1,581 114,458 7 745 1,383 106,971 8 725 1,311 102,139 9 715 1,458 106,403 10 785 1,554 113,067 11 675 1,292 98,086 12 710 1,614 110,322 Required A: Use the high-low method to estimate the fixed and variable portions of overhead costs based on machine hours. (Round “Variable cost” answer to 2 decimal places.) Variable cost (per machine hour) ____________ Fixed cost _____________ Required B: Managers expect the plant to operate at a monthly average of 1, 500 machine-hours next year. What are the estimated monthly overhead costs, assuming no inflation?
Adriana Corporation manufactures football equipment. In planning for next year, the managers want to understand the relation between activity and
Month Labor-Hours Machine-Hours Overhead costs
1 720 1,355 $ 102,644
2 720 1,411 103,842
3 675 1,527 109,938
4 750 1,462 108,297
5 785 1,582 116,102
6 755 1,581 114,458
7 745 1,383 106,971
8 725 1,311 102,139
9 715 1,458 106,403
10 785 1,554 113,067
11 675 1,292 98,086
12 710 1,614 110,322
Required A:
- Use the high-low method to estimate the fixed and variable portions of overhead costs based on machine hours. (Round “Variable cost” answer to 2 decimal places.)
Variable cost (per machine hour) ____________
Fixed cost _____________
Required B:
- Managers expect the plant to operate at a monthly average of 1, 500 machine-hours next year. What are the estimated monthly overhead costs, assuming no inflation?
Overhead costs _____________
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