Crosshill Company's total overhead costs at various levels of activity are presented below: Month Machine-Hours Total Overhead Cost April 70,000 May 60,000 June 80,000 July 90,000 $ $ $ S Utilities (variable) Supervisory salaries (fixed) Maintenance (mixed) Total overhead cost 205,000 184,500 225,500 Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 60,000-machine-hour level of activity in May is as follows: $ 52,800 21,000 110,700 $ 184,500 246,000 The company wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the $246,000 of overhead cost in July was maintenance cost. (Hint: To do this, first determine how much of the $246,000 consisted of utilities and supervisory salaries. Think about the behaviour of variable and fixed costs within the relevant range.) (Round the "Varlable cost per unit" to 2 decimal places.) 2. Using the high-low method, estimate a cost formula for maintenance. (Round the "Varlable cost per unit" to 2 decimal places.) 3. Express the company's total overhead cost in the form Y= a + bx (Round the "Varlable cost per unit" to 2 decimal places.) 4. What total overhead cost would you expect to be incurred at an activity level of 75,000 machine-hours? (Round the "Varlable
Crosshill Company's total overhead costs at various levels of activity are presented below: Month Machine-Hours Total Overhead Cost April 70,000 May 60,000 June 80,000 July 90,000 $ $ $ S Utilities (variable) Supervisory salaries (fixed) Maintenance (mixed) Total overhead cost 205,000 184,500 225,500 Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 60,000-machine-hour level of activity in May is as follows: $ 52,800 21,000 110,700 $ 184,500 246,000 The company wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the $246,000 of overhead cost in July was maintenance cost. (Hint: To do this, first determine how much of the $246,000 consisted of utilities and supervisory salaries. Think about the behaviour of variable and fixed costs within the relevant range.) (Round the "Varlable cost per unit" to 2 decimal places.) 2. Using the high-low method, estimate a cost formula for maintenance. (Round the "Varlable cost per unit" to 2 decimal places.) 3. Express the company's total overhead cost in the form Y= a + bx (Round the "Varlable cost per unit" to 2 decimal places.) 4. What total overhead cost would you expect to be incurred at an activity level of 75,000 machine-hours? (Round the "Varlable
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:Crosshill Company's total overhead costs at various levels of activity are presented below:
Month Machine-Hours Total Overhead Cost
April 70,000
$
May 60,000
$
June 80,000
$
July 90,000
$
Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at
the 60,000-machine-hour level of activity in May is as follows:
Utilities (variable)
Supervisory salaries (fixed)
Maintenance (mixed)
Total overhead cost
52,800
21,000
110,700
$ 184,500
205,000
184,500
225,500
246,000
$
The company wants to break down the maintenance cost into its variable and fixed cost elements.
Required:
1. Estimate how much of the $246,000 of overhead cost in July was maintenance cost. (Hint: To do this, first determine how much
of the $246,000 consisted of utilities and supervisory salaries. Think about the behaviour of variable and fixed costs within the
relevant range.) (Round the "Varlable cost per unit" to 2 decimal places.)
2. Using the high-low method, estimate a cost formula for maintenance. (Round the "Varlable cost per unit" to 2 decimal places.)
3. Express the company's total overhead cost in the form Y = a + bx. (Round the "Varlable cost per unit" to 2 decimal places.)
4. What total overhead cost would you expect to be incurred at an activity level of 75,000 machine-hours? (Round the "Varlable
cost per unit" to 2 decimal places.)
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