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Business Accounting ACC 202 Principles of Accounting 2 Ball State University

Mixed cost: Mixed cost is a cost that includes both the fixed cost and the variable cost. It represents the total cost of the activity or production. Variable Cost: Variable cost is a cost that changes when the volume of production changes, in the same direction and in the same proportion. Fixed Cost: Fixed cost is a cost that remains constant irrespective of the changes in the production volume. High-low method: High-low method is a method of calculating the variable cost and the fixed cost of a product or service. The calculation of this method is based on the total production/activity cost and lowest production/activity cost of the product during any period. To Determine: Calculate the amount of maintenance cost that is included in the $17,625,000 factory overhead cost at the high level of activity. Using the high-low method, estimate a cost formula for maintenance. Estimate the total factory overhead costs be at 70,000 direct labour-hours. Solution: The maintenance cost of $4,125,000 is included in the $17,625,000 factory overhead cost at the high level of activity. The cost formula for maintenance is : The total factory overhead costs at 70,000 direct labour hour is $16,950,000. Expiations: All calculations and working are explained step by step as below. Calculations: Maintenance cost at the high level of activity. Indirect materials cost per labor hour = Indirect materials cost at high activity level = Total factory overhead cost at high level of activity $17,625,000 Less : Indirect materials -$7,500,000 Less: Rent -$6,000,000 Maintenance Cost at high level of activity $4,125,000 Cost formula for maintenance expenses Step 1: Identify high and low activities level. Particulars Cost/Unit (X1) : Total cost of highest activity $4,125,000 (X2) : Highest activity unit 75,000 (Y1) : Total cost of lowest activity $3,250,000 (Y2) : Lowest activity unit 50,000 Step 2: Calculate the variable cost per direct labour hour Step 3: Calculate the fixed cost Step 4: The cost formula for maintenance expense. Where X is the number of direct labor hour and Y is total maintenance expense. Total factory overhead costs at 70,000 units Maintenance cost at 70,000 unit = = Indirect materials ($100*70,000 labour hours) $7,000,000 Rent $6,000,000 Maintenance $3,950,000 Total factory overhead cost at 70,0000 direct labour hours $16,950,000 Conclusion: Thus, all the solutions are determined and the calculations are explained.

Mixed cost: Mixed cost is a cost that includes both the fixed cost and the variable cost. It represents the total cost of the activity or production. Variable Cost: Variable cost is a cost that changes when the volume of production changes, in the same direction and in the same proportion. Fixed Cost: Fixed cost is a cost that remains constant irrespective of the changes in the production volume. High-low method: High-low method is a method of calculating the variable cost and the fixed cost of a product or service. The calculation of this method is based on the total production/activity cost and lowest production/activity cost of the product during any period. To Determine: Calculate the amount of maintenance cost that is included in the $17,625,000 factory overhead cost at the high level of activity. Using the high-low method, estimate a cost formula for maintenance. Estimate the total factory overhead costs be at 70,000 direct labour-hours. Solution: The maintenance cost of $4,125,000 is included in the $17,625,000 factory overhead cost at the high level of activity. The cost formula for maintenance is : The total factory overhead costs at 70,000 direct labour hour is $16,950,000. Expiations: All calculations and working are explained step by step as below. Calculations: Maintenance cost at the high level of activity. Indirect materials cost per labor hour = Indirect materials cost at high activity level = Total factory overhead cost at high level of activity $17,625,000 Less : Indirect materials -$7,500,000 Less: Rent -$6,000,000 Maintenance Cost at high level of activity $4,125,000 Cost formula for maintenance expenses Step 1: Identify high and low activities level. Particulars Cost/Unit (X1) : Total cost of highest activity $4,125,000 (X2) : Highest activity unit 75,000 (Y1) : Total cost of lowest activity $3,250,000 (Y2) : Lowest activity unit 50,000 Step 2: Calculate the variable cost per direct labour hour Step 3: Calculate the fixed cost Step 4: The cost formula for maintenance expense. Where X is the number of direct labor hour and Y is total maintenance expense. Total factory overhead costs at 70,000 units Maintenance cost at 70,000 unit = = Indirect materials ($100*70,000 labour hours) $7,000,000 Rent $6,000,000 Maintenance $3,950,000 Total factory overhead cost at 70,0000 direct labour hours $16,950,000 Conclusion: Thus, all the solutions are determined and the calculations are explained.

ACC 202 Principles of Accounting 2 Ball State University

ACC 202 Principles of Accounting 2 Ball State University

15th Edition

ISBN: 9781308193977

Author: Noreen, Brewer Garrison

Publisher: MCG/CREATE

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Chapter 2, Problem 16P

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Chapter 2 Solutions

ACC 202 Principles of Accounting 2 Ball State University

Ch. 2.A - Prob. 1E Ch. 2.A - Prob. 2E Ch. 2.A - Prob. 3P Ch. 2.A - Prob. 4P Ch. 2.A - Prob. 5C Ch. 2.B - Prob. 1E Ch. 2.B - Prob. 2E Ch. 2.B - Prob. 3P Ch. 2.B - Prob. 4P Ch. 2 - Prob. 1Q

Ch. 2 - Define the following: (a) direct materials, (b)...Ch. 2 - Explain the difference between a product cost and...Ch. 2 - Distinguish between (a) a variable cost, (b) a...Ch. 2 - Prob. 5Q Ch. 2 - Define the following terms: (a) cost behavior and...Ch. 2 - What is meant by an activity base when dealing...Ch. 2 - Managers often assume a strictly linear...Ch. 2 - Distinguish between discretionary fixed costs and...Ch. 2 - Does the concept of the relevant range apply to...Ch. 2 - What is the major disadvantage of the high-low...Ch. 2 - Prob. 12Q Ch. 2 - Prob. 13Q Ch. 2 - What is the difference between a traditional...Ch. 2 - Prob. 15Q Ch. 2 - Prob. 16Q Ch. 2 - Prob. 17Q Ch. 2 - Prob. 1AE Ch. 2 - Prob. 2AE Ch. 2 - L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - Prob. 1F15 Ch. 2 - L012, L013, L014, L015, L016 Martinez Company’s...Ch. 2 - L01–1, L01–2, L01–3, L01–4, L01–5, L01–6 Martinez...Ch. 2 - L01–1, L01–2, L01–3, L01–4, L01–5, L01–6 Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - EXERCISE 1—1 Identifying Direct and Indirect Costs...Ch. 2 - EXERCISE 1-2 Classifying Manufacturing Costs LO1-2...Ch. 2 - EXERCISE 1-3 Classifying Costs as Product or...Ch. 2 - EXERCISE 14 Fixed and Variable Cost Behavior LO14...Ch. 2 - Prob. 5E Ch. 2 - EXERCISE 1—6 Traditional and Contribution Format...Ch. 2 - Prob. 7E Ch. 2 - Prob. 8E Ch. 2 - Prob. 9E Ch. 2 - Prob. 10E Ch. 2 - Prob. 11E Ch. 2 - EXERCISE 1-12 Product and Period Cost Flows LO1–3...Ch. 2 - Prob. 13E Ch. 2 - EXERCISE 2-14 High-Low Method: Predicting Cost...Ch. 2 - Prob. 15E Ch. 2 - Prob. 16P Ch. 2 - Prob. 17P Ch. 2 - PROBLEM 1-18 Direct and Indirect Costs; variable...Ch. 2 - Prob. 19P Ch. 2 - PROBLEM 2-20 High-Low Method; Predicting Cost...Ch. 2 - PROBLEM 2-21 Cost Classification [L02-1, L02-3,...Ch. 2 - Prob. 22P Ch. 2 - Prob. 23P Ch. 2 - Prob. 24P Ch. 2 - Prob. 25P Ch. 2 - Prob. 26C Ch. 2 - Prob. 27C

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