Goulburn, Incorporated produces parts for heavy equipment used in mining and construction. The plant that produces one part common to many vehicles is highly automated, so all labor is considered part of factory overhead. The plant manager, who has just been promoted, would like to understand how overhead costs fluctuate in order to improve planning and budgets. After discussions with both financial and operations members of the plant staff, there is general agreement that the best cost driver for overhead is machine-hours. Monthly data were collected from the most recent two years on machine-hours and overhead. More months of data were available, but a process change had taken place about 30 months earlier, so the staff believed any data from before that time would be misleading. The data are shown in the following table: Month 3 9 10 11 12 13 15 16 17 18 19 20 21 22 23 24 Machine-Hours 40,300 38,300 31,100 43,400 $1,600 46,500 43,400 63,100 37,300 54,700 53,700 37,300 60,900 59,900 46,500 40,300 56,800 51,400 61,900 50,600 54,700 30,100 60,900 59,900 Factory Overhead $ 528,100 417,500 366,800 499,200 591,700 504,400 477,900 719,900 426,300 662,000 617,700 491,500 694,000 655,700 581,000 528,900 684,400 614,700 670,500 620,100 673,100 446,000 693,400 719,500
Goulburn, Incorporated produces parts for heavy equipment used in mining and construction. The plant that produces one part common to many vehicles is highly automated, so all labor is considered part of factory overhead. The plant manager, who has just been promoted, would like to understand how overhead costs fluctuate in order to improve planning and budgets. After discussions with both financial and operations members of the plant staff, there is general agreement that the best cost driver for overhead is machine-hours. Monthly data were collected from the most recent two years on machine-hours and overhead. More months of data were available, but a process change had taken place about 30 months earlier, so the staff believed any data from before that time would be misleading. The data are shown in the following table: Month 3 9 10 11 12 13 15 16 17 18 19 20 21 22 23 24 Machine-Hours 40,300 38,300 31,100 43,400 $1,600 46,500 43,400 63,100 37,300 54,700 53,700 37,300 60,900 59,900 46,500 40,300 56,800 51,400 61,900 50,600 54,700 30,100 60,900 59,900 Factory Overhead $ 528,100 417,500 366,800 499,200 591,700 504,400 477,900 719,900 426,300 662,000 617,700 491,500 694,000 655,700 581,000 528,900 684,400 614,700 670,500 620,100 673,100 446,000 693,400 719,500
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![Goulburn, Incorporated produces parts for heavy equipment used in mining and construction. The plant that produces one part
common to many vehicles is highly automated, so all labor is considered part of factory overhead. The plant manager, who has just
been promoted, would like to understand how overhead costs fluctuate in order to improve planning and budgets. After discussions
with both financial and operations members of the plant staff, there is general agreement that the best cost driver for overhead is
machine-hours.
Monthly data were collected from the most recent two years on machine-hours and overhead. More months of data were available, but
a process change had taken place about 30 months earlier, so the staff believed any data from before that time would be misleading.
The data are shown in the following table:
Month
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
Machine-Hours
40,300
38,300
31,100
43,400
51,600
46,500
43,400
63,100
37,300
54,700
53,700
37,300
60,900
59,900
46,500
40,300
56,800
51,600
61,900
50,600
54,700
30,100
60,900
59,900
Factory Overhead
$ 528,100
417,500
366,800
499,200
591,700
504,400
477,900
719,900
426,300
662,000
617,700
491,500
694,000
655,700
581,000
528,900
684,400
614,700
670,500
620,100
673,100
446,000
493,400
719,500](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fce00524e-f32e-4d92-aef5-05da1c6e8e05%2F72525ab1-872c-4f8c-aabf-d2f6ef1c5efc%2Foofzqoo_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Goulburn, Incorporated produces parts for heavy equipment used in mining and construction. The plant that produces one part
common to many vehicles is highly automated, so all labor is considered part of factory overhead. The plant manager, who has just
been promoted, would like to understand how overhead costs fluctuate in order to improve planning and budgets. After discussions
with both financial and operations members of the plant staff, there is general agreement that the best cost driver for overhead is
machine-hours.
Monthly data were collected from the most recent two years on machine-hours and overhead. More months of data were available, but
a process change had taken place about 30 months earlier, so the staff believed any data from before that time would be misleading.
The data are shown in the following table:
Month
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
Machine-Hours
40,300
38,300
31,100
43,400
51,600
46,500
43,400
63,100
37,300
54,700
53,700
37,300
60,900
59,900
46,500
40,300
56,800
51,600
61,900
50,600
54,700
30,100
60,900
59,900
Factory Overhead
$ 528,100
417,500
366,800
499,200
591,700
504,400
477,900
719,900
426,300
662,000
617,700
491,500
694,000
655,700
581,000
528,900
684,400
614,700
670,500
620,100
673,100
446,000
493,400
719,500
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