The following information is available regarding the total manufacturing overhead of Bursa Mfg. Co. for a recent four-month period.| Month | Machine-Hours | Manufacturing Overhead ||----------|---------------|------------------------|| January | 5,000 | $300,000 || February | 3,200 | 224,000 || March | 4,000 | 263,000 || April | 2,600 | 190,000 |**Instructions:****a-1.** Use the high-low method to determine the variable element of manufacturing overhead costs per machine-hour. *(Round your answer to 2 decimal places.)***a-2.** Use the high-low method to determine the fixed element of monthly overhead cost. *(Round "Manufacturing overhead cost" to 2 decimal places.)***b.** Bursa expects machine-hours in May to equal 5,300. Use the cost relationships determined in part a to forecast May's manufacturing overhead costs. *(Round "Manufacturing overhead cost" to 2 decimal places.)***c.** Suppose Bursa had used the cost relationships determined in part a to estimate the total manufacturing overhead expected for the months of February and March. By what amounts would Bursa have over- or underestimated these costs? *(Round "Manufacturing overhead cost" to 2 decimal places.)*| | ||------------------------|------------------------------|| **a-1.** | Manufacturing overhead cost per machine hour || **a-2.** | Fixed element of monthly overhead cost || **b.** | Estimated manufacturing overhead cost || **c.** | Amount || February | || March | |**Note:** The task involves applying the high-low method to distinguish variable and fixed costs from mixed costs, often used in managerial accounting for budgeting and forecasting.

(Note: Since you have posted a multi-part question, we will solve the first three parts for you. For the remaining parts, please re-post the question with the unsolved parts.) Machine hours Manufacturing overhead High value 5,900 $300,000 Low value 2,600 $190,000Variable element of manufacturing overhead costs per machine-hour = Difference in manufacturing overhead at high and low points/Difference in machine hours at high and low points Substitute the values in the formula. Variable element of manufacturing overhead costs per machine-hour = ($300,000 - $190,000)/(5,900 - 2,600) = $33.33 Hence, the variable element of manufacturing overhead costs per machine-hour using the high-low method is "$33.33".At machine hours 5,900, variable costs @ $33.33 = $196,647 Total manufacturing overhead at machine hours 5,900 = $300,000 Balance amount is fixed costs. Fixed costs = $300,000 - $196,647 = $103,353. Hence, the fixed element of monthly overhead cost using the high-low method is $103,353.Machine hours used in May 5,300 Variable manufacturing overhead (5,300 machine hours @ $33.33) $176,649 Fixed manufacturing overhead $103,353 Total manufacturing overhead in May $280,002 Hence, the manufacturing overhead costs of May is $280,002.

Answered: = high-low method to determine the…

Business

Accounting

= high-low method to determine the variable element

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

The following information is available regarding the total manufacturing overhead of Bursa Mfg. Co. for a recent four-month period.

| Month | Machine-Hours | Manufacturing Overhead |
|----------|---------------|------------------------|
| January | 5,000 | $300,000 |
| February | 3,200 | 224,000 |
| March | 4,000 | 263,000 |
| April | 2,600 | 190,000 |

**Instructions:**

**a-1.** Use the high-low method to determine the variable element of manufacturing overhead costs per machine-hour. *(Round your answer to 2 decimal places.)*

**a-2.** Use the high-low method to determine the fixed element of monthly overhead cost. *(Round "Manufacturing overhead cost" to 2 decimal places.)*

**b.** Bursa expects machine-hours in May to equal 5,300. Use the cost relationships determined in part a to forecast May's manufacturing overhead costs. *(Round "Manufacturing overhead cost" to 2 decimal places.)*

**c.** Suppose Bursa had used the cost relationships determined in part a to estimate the total manufacturing overhead expected for the months of February and March. By what amounts would Bursa have over- or underestimated these costs? *(Round "Manufacturing overhead cost" to 2 decimal places.)*

| | |
|------------------------|------------------------------|
| **a-1.** | Manufacturing overhead cost per machine hour |
| **a-2.** | Fixed element of monthly overhead cost |
| **b.** | Estimated manufacturing overhead cost |
| **c.** | Amount |
| February | |
| March | |

**Note:** The task involves applying the high-low method to distinguish variable and fixed costs from mixed costs, often used in managerial accounting for budgeting and forecasting.

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a-1 Determination of high and low values of machine hours and corresponding manufacturing overhead

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