Question 1 Vieux Enterprise's total overhead costs at various levels of activity follow: Total Overhead Costs April 70.000 $198.000 May 100.000 270,000 June 80.000 222.000 July 90.000 246.000 Machine- Month Hours Assume that the total overhead costs consist of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 70.000 machine-hour level of activity is as follows: Utilities (V) $56.000 Supervisory salaries (F) 25.000 Maintenance (M) 117,000 Total overhead costs $198.000 V-variable: F-fixed: M - mixed. Vieux Enterprise's management wants to break the maintenance cost down into its basic variable and fixed cost elements. 1. As shown, overhead costs in May amounted to $270.000. Determine how much of this consisted of maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $270.000 consisted of utilities and supervisory salaries. Think about the behaviour of variable and fixed costs) 2. By means of the high-low method, estimate a cost formula for maintenance. (Round the "Variable cost" to 2 decimal places.) 3. Express the company's total overhead costs in the linear equation form Y-a-b (Round the "Variable cost" to 2 decimal places.) 4. What total overhead costs would you expect to be incurred at an operating activity level of 75,000 machine-hours? At an operating activity level of 105.000 machine-hours? (Do not round intermediate calculations.)
Question 1 Vieux Enterprise's total overhead costs at various levels of activity follow: Total Overhead Costs April 70.000 $198.000 May 100.000 270,000 June 80.000 222.000 July 90.000 246.000 Machine- Month Hours Assume that the total overhead costs consist of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 70.000 machine-hour level of activity is as follows: Utilities (V) $56.000 Supervisory salaries (F) 25.000 Maintenance (M) 117,000 Total overhead costs $198.000 V-variable: F-fixed: M - mixed. Vieux Enterprise's management wants to break the maintenance cost down into its basic variable and fixed cost elements. 1. As shown, overhead costs in May amounted to $270.000. Determine how much of this consisted of maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $270.000 consisted of utilities and supervisory salaries. Think about the behaviour of variable and fixed costs) 2. By means of the high-low method, estimate a cost formula for maintenance. (Round the "Variable cost" to 2 decimal places.) 3. Express the company's total overhead costs in the linear equation form Y-a-b (Round the "Variable cost" to 2 decimal places.) 4. What total overhead costs would you expect to be incurred at an operating activity level of 75,000 machine-hours? At an operating activity level of 105.000 machine-hours? (Do not round intermediate calculations.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Question 1
Vieux Enterprise's total overhead costs at various levels of activity follow:
Total
Machine- Overhead
Costs
Hours
April 70,000 $198,000
May 100,000 270,000
June 80,000 222,000
July 90,000 246,000
Month
Assume that the total overhead costs consist of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 70,000 machine-hour level of activity is as follows:
Utilities (V)
$56,000
Supervisory salaries (F) 25,000
Maintenance (M)
117,000
Total overhead costs $198,000
V-variable; F = fixed; M - mixed.
Vieux Enterprise's management wants to break the maintenance cost down into its basic variable and fixed cost elements.
1. As shown, overhead costs in May amounted to $270,000. Determine how much of this consisted of maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $270,000 consisted of utilities and supervisory salaries. Think about the behaviour of
variable and fixed costs!)
2. By means of the high-low method, estimate a cost formula for maintenance. (Round the "Variable cost" to 2 decimal places.)
3. Express the company's total overhead costs in the linear equation form Y-a + b (Round the "Variable cost" to 2 decimal places.)
4. What total overhead costs would you expect to be incurred at an operating activity level of 75,000 machine-hours? At an operating activity level of 105,000 machine-hours? (Do not round intermediate calculations.)
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