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 Level of Activity Low 62,200 $36, 159, 600 Indirect materials (variable) Rent (fixed) Maintenance (mixed) Total factory overhead costs The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 62,200 machine-hours level of activity as follows: High 82, 200 $40,519,600 Maintenance $ 9,019,000 18,100,000 9,040, 600 $36,159,600 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 $40,519,600 at the high level of activity consists of maintenance cost.
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 Level of Activity Low 62,200 $36, 159, 600 Indirect materials (variable) Rent (fixed) Maintenance (mixed) Total factory overhead costs The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 62,200 machine-hours level of activity as follows: High 82, 200 $40,519,600 Maintenance $ 9,019,000 18,100,000 9,040, 600 $36,159,600 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 $40,519,600 at the high level of activity consists of maintenance cost.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![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
The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed
these costs at the 62,200 machine-hours level of activity as follows:
Level of Activity
Low
62,200
$36, 159, 600
Maintenance
cost
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 $40,519,600 at the high level of activity consists of maintenance
cost.
Y =
+
High
82, 200
$40,519,600
$
22,600,000
$ 9,019,000
18,100,000
9,040,600
$36, 159, 600
2. Using the high-low method, estimate a cost formula for maintenance.
X
3. What total overhead costs would you expect the company to incur at an operating level of 67,200 machine-hours?
Total factory overhead
costs](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fed7684a8-5e4a-4bcf-86c5-d02b96c96db4%2F8c63a1db-62c1-4ad8-af20-25a84235122e%2Fwljd7g_processed.png&w=3840&q=75)
Transcribed Image Text: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
The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed
these costs at the 62,200 machine-hours level of activity as follows:
Level of Activity
Low
62,200
$36, 159, 600
Maintenance
cost
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 $40,519,600 at the high level of activity consists of maintenance
cost.
Y =
+
High
82, 200
$40,519,600
$
22,600,000
$ 9,019,000
18,100,000
9,040,600
$36, 159, 600
2. Using the high-low method, estimate a cost formula for maintenance.
X
3. What total overhead costs would you expect the company to incur at an operating level of 67,200 machine-hours?
Total factory overhead
costs
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