Exercise 5-36 (Algo) Methods of Estimating Costs: High-Low (LO 5-1, 2) Fiske Corporation manufactures a popular regional brand of kitchen utensils. The design and variety have been fairly constant over the last three years. The managers at Fiske are planning for some changes in the product line next year, but first they want to. understand better the relation between activity and factory costs as experienced with the current products. Discussions with the plant supervisor suggest that overhead seems to vary with labor-hours, machine-hours, or both. The following data were collected from the last three years of operations: Labor-Hours Factory costs Quarter Machine-Hours 5 123456 1 18,850 14,905 $ 3,388,671 2 18,590 15,477 3,425,136 3 17,480 16,720 3,617,144 4 19,240 15,983 3,573,240 21,280 17,501 3,812,284 19,630 17,369 3,777,312 7 19,240 15,290 3,531,726 8 9 89 18,850 14,366 3,369,102 18,460 15,994 3,512,487 10 20,670 16,995 3,730,734 11 12 22 17,550 14,278 3,111,615 18,460 19,444 3,723,786 Required: a. Use the high-low method to estimate the fixed and variable portions of factory costs based on labor-hours. b. Managers expect the plant to operate at 25,000 labor-hours next quarter. Assuming the relationship remains the same with the new product line, what are the estimated quarterly factory costs? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Required B Use the high-low method to estimate the fixed and variable portions of factory costs based on labor-hours. Note: Round "Variable cost" answer to 2 decimal places. Variable cost (per labor-hour) $ 141.37 x Fixed cost $ 1,338,168 x < Prev 6 of 14 Next > *******

Cornerstones of Cost Management (Cornerstones Series)

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Author:Don R. Hansen, Maryanne M. Mowen

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Chapter18: Pricing And Profitability Analysis

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Transcribed Image Text:Exercise 5-36 (Algo) Methods of Estimating Costs: High-Low (LO 5-1, 2) Fiske Corporation manufactures a popular regional brand of kitchen utensils. The design and variety have been fairly constant over the last three years. The managers at Fiske are planning for some changes in the product line next year, but first they want to. understand better the relation between activity and factory costs as experienced with the current products. Discussions with the plant supervisor suggest that overhead seems to vary with labor-hours, machine-hours, or both. The following data were collected from the last three years of operations: Labor-Hours Factory costs Quarter Machine-Hours 5 123456 1 18,850 14,905 $ 3,388,671 2 18,590 15,477 3,425,136 3 17,480 16,720 3,617,144 4 19,240 15,983 3,573,240 21,280 17,501 3,812,284 19,630 17,369 3,777,312 7 19,240 15,290 3,531,726 8 9 89 18,850 14,366 3,369,102 18,460 15,994 3,512,487 10 20,670 16,995 3,730,734 11 12 22 17,550 14,278 3,111,615 18,460 19,444 3,723,786 Required: a. Use the high-low method to estimate the fixed and variable portions of factory costs based on labor-hours. b. Managers expect the plant to operate at 25,000 labor-hours next quarter. Assuming the relationship remains the same with the new product line, what are the estimated quarterly factory costs? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Required B Use the high-low method to estimate the fixed and variable portions of factory costs based on labor-hours. Note: Round "Variable cost" answer to 2 decimal places. Variable cost (per labor-hour) $ 141.37 x Fixed cost $ 1,338,168 x <Required A Required B > < Prev 6 of 14 Next > *******

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