Homework Help is Here – Start Your Trial Now!
Business
Accounting
Maintenance cost at 7,200 machine hours = Variable cost + Fixed cost = (7, 200 x $3) + $30,000 = $51, 600 Therefore, option "b. $51,600" is correct.

Maintenance cost at 7,200 machine hours = Variable cost + Fixed cost = (7, 200 x $3) + $30,000 = $51, 600 Therefore, option "b. $51,600" is correct.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

I need to figure out from where the $ 3 dollar amount is coming from

Step 1 Fixed cost os fixed at every level of output. Whereas, variable cost varies with the change in output. Step 2 Calculation of expected maintenance cost: Highest cost-Lowest cost Variable cost per unit = Highest activity level-Lowest activity level $130,000–S100,000 10,000-5,000 = $6 Per unit variable cost for indirect material Variable cost of indirect material Machine hour $10,000 5,000 = $2 Per unit variable cost for maintenance = Variable cost per unit = Per units variable cost for indirect material = $6 – $2 = $4 Fixed cost maintenance = $50, 000 – (5,000 x 4) = $30, 000 Maintenance cost at 7, 200 machine hours = Variable.cost + Fixed cost = (7, 200 x $3) + $30, 000 = $51, 600 Therefore, option "b. $51,600" is correct.
Transcribed Image Text:Step 1 Fixed cost os fixed at every level of output. Whereas, variable cost varies with the change in output. Step 2 Calculation of expected maintenance cost: Highest cost-Lowest cost Variable cost per unit = Highest activity level-Lowest activity level $130,000–S100,000 10,000-5,000 = $6 Per unit variable cost for indirect material Variable cost of indirect material Machine hour $10,000 5,000 = $2 Per unit variable cost for maintenance = Variable cost per unit = Per units variable cost for indirect material = $6 – $2 = $4 Fixed cost maintenance = $50, 000 – (5,000 x 4) = $30, 000 Maintenance cost at 7, 200 machine hours = Variable.cost + Fixed cost = (7, 200 x $3) + $30, 000 = $51, 600 Therefore, option "b. $51,600" is correct.
7 Augusta Inc. is a manufacturing company whose total factory overhead costs fluctuate somewhat from month to month The manager of the company believes that the cost driver is the number of machine-hours used in its production facility. These costs for the last four months in 2020 are given below. Total factory overhead 2$ Machine-hours 6,500 10,000 8,500 104,400 $ 130,000 $ 118,500 $ 100,000 September October November December 5,000 The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 5,000 machine-hours level of activity as follows: Indirect materials (variable) Rent (fixed) Maintenance (mixed) Total factory overhead costs 2$ 10,000 50,000 24 100,000 Assume that all data are within the relevant range, using the high-low method how much maintenance cost would you expect the company to incur at an operating level of 7200 machine-hours? (Round to the nearest dollars.) A. 24 58,800 В. 24 51,600 С. 2$ 73,200 D. 2$ 37,920 None of the above E.
Transcribed Image Text:7 Augusta Inc. is a manufacturing company whose total factory overhead costs fluctuate somewhat from month to month The manager of the company believes that the cost driver is the number of machine-hours used in its production facility. These costs for the last four months in 2020 are given below. Total factory overhead 2$ Machine-hours 6,500 10,000 8,500 104,400 $ 130,000 $ 118,500 $ 100,000 September October November December 5,000 The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 5,000 machine-hours level of activity as follows: Indirect materials (variable) Rent (fixed) Maintenance (mixed) Total factory overhead costs 2$ 10,000 50,000 24 100,000 Assume that all data are within the relevant range, using the high-low method how much maintenance cost would you expect the company to incur at an operating level of 7200 machine-hours? (Round to the nearest dollars.) A. 24 58,800 В. 24 51,600 С. 2$ 73,200 D. 2$ 37,920 None of the above E.
Expert Solution
Step 1 Introduction

The question is based on the concept of Cost Accounting.

steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Flow of Funds
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS