Amfac Company manufactures a single product. The company keeps careful records of manufacturingactivities from which the following information has been extracted:Level of ActivityMarch–Low June–HighNumber of units produced ......................... 6,000 9,000Cost of goods manufactured ..................... $168,000 $257,000Work in process inventory, beginning ....... $9,000 $32,000Work in process inventory, ending ............ $15,000 $21,000Direct materials cost per unit .................... $6 $6Direct labor cost per unit ........................... $10 $10Manufacturing overhead cost, total ........... ? ?The company’s manufacturing overhead cost consists of both variable and fixed cost elements. Tohave data available for planning, management wants to determine how much of the overhead cost is variable with units produced and how much of it is fixed per month.Required:1. For both March and June, estimate the amount of manufacturing overhead cost added to production.The company had no underapplied or overapplied overhead in either month. (Hint: A useful way toproceed might be to construct a schedule of cost of goods manufactured.)2. Using the high-low method, estimate a cost formula for manufacturing overhead. Express the variableportion of the formula in terms of a variable rate per unit of product.3. If 7,000 units are produced during a month, what would be the cost of goods manufactured? (Assumethat work in process inventories do not change and that there is no underapplied or overappliedoverhead cost for the month.)
Amfac Company manufactures a single product. The company keeps careful records of manufacturing
activities from which the following information has been extracted:
Level of Activity
March–Low June–High
Number of units produced ......................... 6,000 9,000
Cost of goods manufactured ..................... $168,000 $257,000
Work in process inventory, beginning ....... $9,000 $32,000
Work in process inventory, ending ............ $15,000 $21,000
Direct materials cost per unit .................... $6 $6
Direct labor cost per unit ........................... $10 $10
The company’s manufacturing overhead cost consists of both variable and fixed cost elements. To
have data available for planning, management wants to determine how much of the overhead cost is variable with units produced and how much of it is fixed per month.
Required:
1. For both March and June, estimate the amount of manufacturing overhead cost added to production.
The company had no underapplied or overapplied overhead in either month. (Hint: A useful way to
proceed might be to construct a schedule of cost of goods manufactured.)
2. Using the high-low method, estimate a cost formula for manufacturing overhead. Express the variable
portion of the formula in terms of a variable rate per unit of product.
3. If 7,000 units are produced during a month, what would be the cost of goods manufactured? (Assume
that work in process inventories do not change and that there is no underapplied or overapplied
overhead cost for the month.)
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