High-Low and Cost Formula Harrison Company has accumulated the following total manufacturing overhead costs for two levels of activity (within the relevant range): Activity (direct labor hours) Low High 90,000 130,000 Total manufacturing overhead $484,000 $628,000 The total overhead cost includes variable, fixed, and mixed costs. At 130,000 direct labor hours, the total cost breakdown is as follows: Variable cost Fixed cost $286,000 85,000 Semi-mixed cost $257,000 a. Using the high-low method of cost analysis, determine the variable portion of the semi-variable cost per direct labor hour. Determine the total fixed cost component of the mixed cost. Isolate mixed costs: Do not use negative signs with your answers. Total cost Less: Variable cost Low High $ 484,000 $628,000 324,000 468,000 Fixed cost 160,000 160,000 Total mixed cost $ 484,000 $ 628,000 High-Low Analysis: Round variable portion per unit to two decimal places, if applicable. Direct Labor Hours Total Mixed Cost Variable Portion Fixed Portion High 130,000 $ 628,000 $ 468,000 = $ 160,000 Low 90,000 484,000 324,000 160,000 Difference 144,000 $ 40,000 Variable portion per unit: $ 3.6 b. What should the total planned overhead cost be at 115,000 direct labor hours? Variable Cost Per Unit Fixed Costs Variable cost $ 414,000 Fixed cost 160,000 Mixed: Variable portion Fixed portion 414,000 160,000 Totals: $ 828,000 $ 320,000 Total planned overhead for 115,000 direct labor hours $ 574,000
High-Low and Cost Formula Harrison Company has accumulated the following total manufacturing overhead costs for two levels of activity (within the relevant range): Activity (direct labor hours) Low High 90,000 130,000 Total manufacturing overhead $484,000 $628,000 The total overhead cost includes variable, fixed, and mixed costs. At 130,000 direct labor hours, the total cost breakdown is as follows: Variable cost Fixed cost $286,000 85,000 Semi-mixed cost $257,000 a. Using the high-low method of cost analysis, determine the variable portion of the semi-variable cost per direct labor hour. Determine the total fixed cost component of the mixed cost. Isolate mixed costs: Do not use negative signs with your answers. Total cost Less: Variable cost Low High $ 484,000 $628,000 324,000 468,000 Fixed cost 160,000 160,000 Total mixed cost $ 484,000 $ 628,000 High-Low Analysis: Round variable portion per unit to two decimal places, if applicable. Direct Labor Hours Total Mixed Cost Variable Portion Fixed Portion High 130,000 $ 628,000 $ 468,000 = $ 160,000 Low 90,000 484,000 324,000 160,000 Difference 144,000 $ 40,000 Variable portion per unit: $ 3.6 b. What should the total planned overhead cost be at 115,000 direct labor hours? Variable Cost Per Unit Fixed Costs Variable cost $ 414,000 Fixed cost 160,000 Mixed: Variable portion Fixed portion 414,000 160,000 Totals: $ 828,000 $ 320,000 Total planned overhead for 115,000 direct labor hours $ 574,000
Chapter5: Process Costing
Section: Chapter Questions
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Transcribed Image Text:High-Low and Cost Formula
Harrison Company has accumulated the following total manufacturing overhead costs for two levels of activity (within the relevant range):
Activity (direct labor hours)
Low
High
90,000 130,000
Total manufacturing overhead $484,000 $628,000
The total overhead cost includes variable, fixed, and mixed costs. At 130,000 direct labor hours, the total cost breakdown is as follows:
Variable cost
Fixed cost
$286,000
85,000
Semi-mixed cost $257,000
a. Using the high-low method of cost analysis, determine the variable portion of the semi-variable cost per direct labor hour. Determine the total fixed cost component of the mixed cost.
Isolate mixed costs:
Do not use negative signs with your answers.
Total cost
Less: Variable cost
Low
High
$
484,000 $628,000
324,000
468,000
Fixed cost
160,000
160,000
Total mixed cost
$
484,000 $
628,000
High-Low Analysis:
Round variable portion per unit to two decimal places, if applicable.
Direct Labor Hours Total Mixed Cost
Variable
Portion
Fixed
Portion
High
130,000 $
628,000
$ 468,000 = $ 160,000
Low
90,000
484,000
324,000
160,000
Difference
144,000 $
40,000
Variable portion per unit: $ 3.6
b. What should the total planned overhead cost be at 115,000 direct labor hours?
Variable
Cost Per
Unit
Fixed Costs
Variable cost
$
414,000
Fixed cost
160,000
Mixed:
Variable portion
Fixed portion
414,000
160,000
Totals:
$ 828,000 $
320,000
Total planned overhead for 115,000 direct labor hours $ 574,000
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