MANAGERIAL ACCOUNTING W/ACCESS >IP<
16th Edition
ISBN: 9781259753961
Author: Garrison
Publisher: MCG CUSTOM
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 2, Problem 20P
PROBLEM 2-20 High-Low Method; Predicting Cost [L02-4, L02-5]
Nova Company’s total
| Month | MachineHours | Total Overhead Cost |
| April …. | 70,000 | $198,000 |
| May …. | 60,000 | $174,000 |
| June …. | 80,000 | $222,000 |
| July …. | 90,000 | $246,000 |
Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 60,000 machine-hour level of activity is:
| Utilities (variable) …. | $48,000 |
| Supervisory salaries (fixed) ... | 21,000 |
| Maintenance (mixed) | 105,000 |
| Total overhead cost | $174,000 |
Nova Company’s management wants to break down the maintenance cost into its variable and fixed cost elements.
Required:
1. Estimate how much of the $246,000 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $246,000 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs!)
2. Using the high-low method, estimate a cost formula for maintenance.
3. Express the company’s total overhead cost in the linear equation form Y = a + bX.
4. What total overhead cost would you expect to be incurred at an activity level of 75,000 machine-hours?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Give correct an
Answer this
What is the average cost per unit ?
Chapter 2 Solutions
MANAGERIAL ACCOUNTING W/ACCESS >IP<
Ch. 2.A - Prob. 1ECh. 2.A - Prob. 2ECh. 2.A - Prob. 3PCh. 2.A - Prob. 4PCh. 2.A - Prob. 5CCh. 2.B - Prob. 1ECh. 2.B - Prob. 2ECh. 2.B - Prob. 3PCh. 2.B - Prob. 4PCh. 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. 5QCh. 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. 12QCh. 2 - Prob. 13QCh. 2 - What is the difference between a traditional...Ch. 2 - Prob. 15QCh. 2 - Prob. 16QCh. 2 - Prob. 17QCh. 2 - Prob. 1AECh. 2 - Prob. 2AECh. 2 - L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 2 - Prob. 1F15Ch. 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. 5ECh. 2 - EXERCISE 1—6 Traditional and Contribution Format...Ch. 2 - Prob. 7ECh. 2 - Prob. 8ECh. 2 - Prob. 9ECh. 2 - Prob. 10ECh. 2 - Prob. 11ECh. 2 - EXERCISE 1-12 Product and Period Cost Flows LO1–3...Ch. 2 - Prob. 13ECh. 2 - EXERCISE 2-14 High-Low Method: Predicting Cost...Ch. 2 - Prob. 15ECh. 2 - Prob. 16PCh. 2 - Prob. 17PCh. 2 - PROBLEM 1-18 Direct and Indirect Costs; variable...Ch. 2 - Prob. 19PCh. 2 - PROBLEM 2-20 High-Low Method; Predicting Cost...Ch. 2 - PROBLEM 2-21 Cost Classification [L02-1, L02-3,...Ch. 2 - Prob. 22PCh. 2 - Prob. 23PCh. 2 - Prob. 24PCh. 2 - Prob. 25PCh. 2 - Prob. 26CCh. 2 - Prob. 27C
Knowledge Booster
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.Similar questions
- 5 Ferrent is debating whether to invest in new equipment to manufacture industrial distilling vats. The new equipment would cost $900,000 and would have an estimated four-year life and no salvage value. The estimated annual operating results with the new equipment are as follows. (Use Exhibit 26-4.) oints Revenue from sales of industrial distilling vats Expenses other than depreciation eBook Hint Depreciation (straight-line basis) Increase in net income from industrial distilling vats $995,000 $675,000 225,000 900,000 $ 95,000 All revenue from the sale of industrial distilling vats and all expenses (except depreciation) will be received or paid in cash in the same period as recognized for accounting purposes. Required: Print a. Compute the annual cash flows for Ferrent's investment in the new equipment. b. Compute the payback period for Ferrent's investment in the new equipment. Note: Round your answer to 1 decimal place. c. Compute the return on average investment for Ferrent's…arrow_forwardNeed answerarrow_forwardGeneral accountingarrow_forward
- Helparrow_forwardAt the beginning of the year, Logan Company's assets are dollar 200,000 and its equity is dollar 150,000. During the year, assets increase dollar 70,000 and liabilities increase dollar 30,000. What is the equity at the end of the year?arrow_forwardNot use AI solution pleasearrow_forward
- Provide answerarrow_forwardanswer ?? : General accounting questionarrow_forwardA truck costing $280,000 has a salvage value of $20,000 and a useful life of 8 years. The truck is expected to drive 600,000 miles during its lifetime. In year 1, it was driven 50,000 miles, and in year 2, it was driven 45,000 miles. Using the units of activity (units of production) method, compute the depreciation expense in year 2.arrow_forward
- Verano, Inc. provides the following financial data for 2023: • • Credit sales during the year: $4,500,000 . Accounts receivable (December 31, 2023): $410,000 Allowance for bad debts (December 31, 2023): $45,000 Bad debt expense for the year: $25,000 Required: What amount will Verano, Inc. report as the net realizable value (NRV) of accounts receivable on its year- end balance sheet?arrow_forwardHi expert please give me answer general accounting questionarrow_forwardWhat is the cost of goods soldarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Cost Classifications - Managerial Accounting- Fixed Costs Variable Costs Direct & Indirect Costs; Author: Accounting Instruction, Help, & How To;https://www.youtube.com/watch?v=QQd1_gEF1yM;License: Standard Youtube License