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 63,000 $38,749,000 High 83,000 $42,709,000 The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 63,000 machine-hours level of activity as follows: Indirect materials Rent Maintenance Total factory overhead costs $ 9,702,000 21,300,000 7,747,000 $38,749,000 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 $42,709,000 at the high level of activity consists of maintenance cost. Maintenance cost 2. Using the high-low method, estimate a cost formula for maintenance. 3. What total overhead costs would you expect the company to incur at an operating level of 68,000 machine-hours? Total factory overhead costs
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 63,000 $38,749,000 High 83,000 $42,709,000 The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 63,000 machine-hours level of activity as follows: Indirect materials Rent Maintenance Total factory overhead costs $ 9,702,000 21,300,000 7,747,000 $38,749,000 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 $42,709,000 at the high level of activity consists of maintenance cost. Maintenance cost 2. Using the high-low method, estimate a cost formula for maintenance. 3. What total overhead costs would you expect the company to incur at an operating level of 68,000 machine-hours? Total factory overhead costs
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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answer must be in table format or i will give down vote
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
Level of Activity
Low
63,000
$38,749,000
High
83,000
$42,709,000
The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the
63,000 machine-hours level of activity as follows:
Indirect materials
Rent
Maintenance
Total factory overhead costs
$ 9,702,000
21,300,000
7,747,000
$38,749,000
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 $42,709,000 at the high level of activity consists of maintenance cost.
Maintenance cost
2. Using the high-low method, estimate a cost formula for maintenance.
3. What total overhead costs would you expect the company to incur at an operating level of 68,000 machine-hours?
Total factory overhead costs
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