The Solar Panel Solutions manufactures mounting brackets. The overhead costs for manufacturing these brackets include both fixed and variable components. Management wants to analyze these costs and has collected the following data: Units Produced Direct Labor Costs (S) Overhead Costs ($) 200 2,400 3,600 500 6,000 7,500 800 9,600 11,200 100 1,200 2,100 600 7,200 8,400 Calculate the fixed and variable components of the overhead costs using the high-low method.

The Solar Panel Solutions manufactures mounting brackets. The overhead costs for manufacturing these brackets include both fixed and variable components. Management wants to analyze these costs and has collected the following data: Units Produced Direct Labor Costs (S) Overhead Costs ($) 200 2,400 3,600 500 6,000 7,500 800 9,600 11,200 100 1,200 2,100 600 7,200 8,400 Calculate the fixed and variable components of the overhead costs using the high-low method.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 4CE: Larsen, Inc., produces two types of electronic parts and has provided the following data: There are...

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Required information [The following information applies to the questions displayed below.] Celestial Products, Inc., has decided to introduce a new product, which can be manufactured by either a computer- assisted manufacturing system or a labor-intensive production system. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows: Direct material Direct labor (DLH denotes direct-labor hours) Variable overhead Fixed overhead* Computer-Assisted Manufacturing System $ Volume 0.5DLH @ $25.50 0.5DLH @ $16.50 9.00 12.75 8.25 $4,410,000 units Labor-Intensive Production System $ 0.8DLH @ $21.00 0.8DLH @ $16.50 *These costs are directly traceable to the new product line. They would not be incurred if the new product were not produced. 9.90 16.80 13.20 $2,730,000 The company's marketing research department has recommended an introductory unit sales price of $75.00. Selling expenses are estimated to be $900,000…
Need some help making a cheet sheet for an up coming test. please provide examples. The exam covers chapters 1 through 13. Here are some suggested study topics: Cost Classifications - variable, fixed and mixed, period and product, direct and indirect, opportunity, sunk, relevant, traceable, common, etc. Calculate the results of changes to cost assumptions (CVP) Calculate net income based on contribution margin values either dollars or % Application of Manufacturing Overhead - calculate predetermined overhead rate or activity rates applied to a product or job - job order using a predetermined overhead rate or rates and activity-based costing calculate over and underapplied overhead calculate adjusted cost of goods sold Job Costing What is the total cost of the job and average cost per unit. Cost of Goods Manufactured and cost of goods sold Calculate break even and target profit Create a contribution format income statement Gross margin calculations absorption or variable costing…
Scattergraph, High–Low Method, and Predicting Cost for a Different Time Period from the One Used to Develop a Cost Formula Farnsworth Company has gathered data on its overhead activities and associated costs for the past 10 months. Tracy Heppler, a member of the controller's department, has convinced management that overhead costs can be better estimated and controlled if the fixed and variable components of each overhead activity are known. One such activity is receiving raw materials (unloading incoming goods, counting goods, and inspecting goods), which she believes is driven by the number of receiving orders. Ten months of data have been gathered for the receiving activity and are as follows: Month Receiving Orders Receiving Cost ($) 1 1,000 27,000 2 700 22,500 3 1,500 42,000 4 1,200 25,500 5 1,300 37,500 6 1,100 31,500 7 1,600 43,500 8 1,400 36,000 9 1,700 40,500 10 900 24,000 Required: 1. On your own paper, prepare a scattergraph based on the 10…
Larsen, Inc., produces two types of electronic parts and has provided the following data: There are four activities: machining, setting up, testing, and purchasing. Required: 1. Calculate the activity consumption ratios for each product. 2. Calculate the consumption ratios for the plantwide rate (direct labor hours). When compared with the activity ratios, what can you say about the relative accuracy of a plantwide rate? Which product is undercosted? 3. What if the machine hours were used for the plantwide rate? Would this remove the cost distortion of a plantwide rate?
Carboni recently added a carbon line in addition to its aluminum line. The following are estimates to be used in determining the overhead allocation rate for ABC. What would be the predetermined rate for each cost pool?
Potterii sells its products to large box stores and recently added a retail line of products to sell directly to consumers. These estimates are to be used in determining the overhead allocation rate for ABC: What would be the predetermined rate for each cost pool?
The management of Wheeler Company has decided to develop cost formulas for its major overhead activities. Wheeler uses a highly automated manufacturing process, and power costs are a significant manufacturing cost. Cost analysts have decided that power costs are mixed; thus, they must be broken into their fixed and variable elements so that the cost behavior of the power usage activity can be properly described. Machine hours have been selected as the activity driver for power costs. The following data for the past eight quarters have been collected: Required: 1. Prepare a scattergraph by plotting power costs against machine hours. Does the scatter-graph show a linear relationship between machine hours and power cost? 2. Using the high and low points, compute a power cost formula. 3. Use the method of least squares to compute a power cost formula. Evaluate the coefficient of determination. 4. Rerun the regression and drop the point (20,000; 26,000) as an outlier. Compare the results from this regression to those for the regression in Requirement 3. Which is better?
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Which of the following costs would be classified as variable and which would be classified as fixed, if units produced is the activity base? A. Direct materials costs B. Electricity costs of 0.35 per kilowatt-hour
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Electan Company produces two types of printers. The company uses ABC, and all activity drivers are duration drivers. Electan Company is considering using DBC and has gathered the following data to help with its decision. A. Activities with duration drivers: B. Activities with consumption ratios and costs: C. Products with cycle time and practical capacity: Required: 1. Using cycle time and practical capacity for each product, calculate the total time for all primary activities. Comment on the relationship to ABC. 2. Calculate the overhead rate that DBC uses to assign costs. Comment on the relationship to a unit-based plantwide overhead rate. 3. Use the overhead rate calculated in Requirement 2 to calculate (a) the overhead cost per unit for each product, and (b) the total overhead assigned to each product. How does this compare to the ABC assignments shown in Part B of the Information set? 4. What if the units actually produced were 10,000 for Printer A and 18,000 for Printer B. Using DBC, calculate the cost of unused capacity.
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