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: Quarter Machine-Hours Labor-Hours Factory costs 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 5 21,280 17,501 3,812,284 6 19,630 17,369 3,777,312 7 19,240 15,290 3,531,726 8 18,850 14,366 3,369,102 9 18,460 15,994 3,512,487 10 20,670 16,995 3,730,734 11 17,550 14,278 3,111,615 12 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 www < Prev 6 of 14 Next >

FINANCIAL ACCOUNTING

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Chapter1: Financial Statements And Business Decisions

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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: Quarter Machine-Hours Labor-Hours Factory costs 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 5 21,280 17,501 3,812,284 6 19,630 17,369 3,777,312 7 19,240 15,290 3,531,726 8 18,850 14,366 3,369,102 9 18,460 15,994 3,512,487 10 20,670 16,995 3,730,734 11 17,550 14,278 3,111,615 12 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 > www < Prev 6 of 14 Next >

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