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Solville Motors Co. makes motorcycles. Management wants to estimate overhead costs to plan its operations. A recent trade publication revealed that overhead costs tend to vary with machine hours. To check this, they collected the following data for the past 12 months.

Solville Motors Co. makes motorcycles. Management wants to estimate overhead costs to plan its operations. A recent trade publication revealed that overhead costs tend to vary with machine hours. To check this, they collected the following data for the past 12 months.

FINANCIAL ACCOUNTING
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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Kindly answer Requirements number 1, 2, and 3.
Problem 10 Solville Motors Co. makes motorcycles. Management wants to estimate overhead costs to plan its operations. A recent trade publication revealed that overhead costs tend to vary with machine hours. To check this, they collected the following data for the past 12 months. 44 Month No. Machine Hours 175 2 170 3 160 4 190 5 175 IT 6 200 7 160 8 150 9 210 10 180 11 170 145 12 Cost Accounting Overhead Costs P 4,500 4,225 4,321 5.250 4,800 5,100 4,450 4,200 5,475 4,760 4,325 3,975 Requirements 1. Use the high-low method to estimate the fixed and variable portion of overhead costs based on machine hours. 2. If the plant is planning to operate at a level of 200 machine hours next period, what would be the estimated overhead costs? 3. Use the method of least square to estimate the fixed and variable portion of overhead costs based on machine hours.
Transcribed Image Text:Problem 10 Solville Motors Co. makes motorcycles. Management wants to estimate overhead costs to plan its operations. A recent trade publication revealed that overhead costs tend to vary with machine hours. To check this, they collected the following data for the past 12 months. 44 Month No. Machine Hours 175 2 170 3 160 4 190 5 175 IT 6 200 7 160 8 150 9 210 10 180 11 170 145 12 Cost Accounting Overhead Costs P 4,500 4,225 4,321 5.250 4,800 5,100 4,450 4,200 5,475 4,760 4,325 3,975 Requirements 1. Use the high-low method to estimate the fixed and variable portion of overhead costs based on machine hours. 2. If the plant is planning to operate at a level of 200 machine hours next period, what would be the estimated overhead costs? 3. Use the method of least square to estimate the fixed and variable portion of overhead costs based on machine hours.
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