Andover Company makes weather balloons. The company controller wanted to calculate the fixed and variable costs associated with the maintenance costs incurred by the factory. Data for the past six months were collected. Maintenance Machine Month cost hours January $10,120 526 February 9,560 389 March 9,712 412 April 10,460 569 May 10,226 541 June 9,686 399 Required: A. Using the high-low method, calculate the fixed cost of maintenance and the variable rate per machine hour. Round the total fixed cost to the nearest dollar, and round the variable cost per machine hour to two decimal places. B. Using the high-low method, construct the cost formula for the total maintenance cost. C. Calculate the budgeted cost for maintenance assuming that 485 hours are worked next month. Round the answer to the nearest dollar.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
|
Maintenance |
Machine |
|
| Month |
cost |
hours |
| January |
$10,120 |
526 |
| February |
9,560 |
389 |
| March |
9,712 |
412 |
| April |
10,460 |
569 |
| May |
10,226 |
541 |
| June |
9,686 |
399 |
Required:
| A. | Using the high-low method, calculate the fixed cost of maintenance and the variable rate per machine hour. Round the total fixed cost to the nearest dollar, and round the variable cost per machine hour to two decimal places. |
| B. | Using the high-low method, construct the cost formula for the total maintenance cost. |
| C. | Calculate the budgeted cost for maintenance assuming that 485 hours are worked next month. Round the answer to the nearest dollar. |
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