When you are given a manufactured overhead costs how do you separate that into fixed and...

When you are given a manufactured overhead costs how do you separate that into fixed and variable overhead costs?

Expert Solution

There are 4 methods for separating cost into fixed and variable cost - (1)Industrial engineering method (2) Account inspection method, (3)scatter graph method,(4)High and low method.

Industrial engineering method: This method is used by an organisation when it is starting a new activity. This method helps in collecting cost information which is not available in organisation records.This method is applied to material and labour costs which represent a large portion of total output cost.If the relationship between material and labour inputs and outputs remain constant then these costs estimates can be used in future without any making adjustments significantly.

Account inspection method: This method involves examining each account and classifying the accounts total cost into either fixed cost or variable cost.This requires the management accountant to inspect each item of expenditure in the ledgers at a given level of output.

Scatter graph method: Under this method, you should plot several observed levels of cost and their respective activity levels on a scatter graph and apply statistical analysis and then attach the points making a line. This method is mostly used by small companies which don’t have expertise and knowledge to use complicated statistical analysis.

High and low method: Here we consider the highest and lowest volumes of output and relevant costs.

Variable cost per unit = difference of cost ( at two different levels) dividend by difference in output units ( at two different levels).

After arriving variable cost per unit, it is easy to calculate total variable cost by multiplying the number of units and variable cost per unit.

Fixed cost = total cost minus variable cost.

Fixed cost remain constant at all levels of activity.

ekkarill92 answered 1 year ago

How do you calcuate the Fixed Overhead (FOH) spending variance and the Fixed Overhead (FOH) production...

How do you calcuate the Fixed Overhead (FOH) spending variance and the Fixed Overhead (FOH) production volume variance given the following information: (budgeted assembly time is 2 hrs per unit of output) Actual Results Static Budget Number of fans assembled $ sold 220 fans 150 fans Hours of assembley time 396 hours - Variable Overhead (VOH) cost per hr of assembly time - $ 31.00 VOH costs $ 12,693 - FOH cost $ 15,510 $ 14,100

What is pre-determined overhead rate and how is it calculated? What do you do when the...

What is pre-determined overhead rate and how is it calculated? What do you do when the actual overhead for the accounting period is different than applied overhead? Subject: Management Accounting Write more than 300 words

The Alphonse Company allocates fixed overhead costs by machine hours and variable overhead costs by direct...

The Alphonse Company allocates fixed overhead costs by machine hours and variable overhead costs by direct labor hours. At the beginning of the year the company expects fixed overhead costs to be $600,000 and variable costs to be $800,000. The expected machine hours are 6,000 and the expected direct labor hours are 80,000. The actual fixed overhead costs are $700,000 and the actual variable overhead costs are $750,000. The actual machine hours during the year are 5,500 and the actual...

Garrison Managerial Accounting pg. 560 #3. Do traceable fixed manufacturing overhead and common fixed costs have...

Garrison Managerial Accounting pg. 560 #3. Do traceable fixed manufacturing overhead and common fixed costs have to be used in answer to this question? Please answer problem for me. I submitted this problem at 9:10 am and have not received an answer. 3. Assume that Cane expeects to produce and sell 80,000 alphas during the current year. One of Cane's sales representatives had found a new customer that is willing to buy 10,000 additional alphas for a price of $80...

1) How do you calculate and incorporate fixed manufacturing overhead cost into cost of goods sold...

1) How do you calculate and incorporate fixed manufacturing overhead cost into cost of goods sold under absorption costing? Do you have to factor in goods produced as well as goods sold for this aspect of cost of goods sold? 2) When comparing variable costing net income and absorption costing net income, how do you know whether you are adding or deducting fixed manufacturing overhead deferred or released from inventory under absorption costing?

What are examples of fixed and variable costs in a fast food restaurant? How do you...

What are examples of fixed and variable costs in a fast food restaurant? How do you think a firm will be able to maximize their profits if the economy starts to go into a recession?

how to control fixed overhead cost

Variable Direct Costs Machine Hours Fixed Production Costs Fixed Overhead Costs Units Sold Unit Selling price...

Variable Direct Costs Machine Hours Fixed Production Costs Fixed Overhead Costs Units Sold Unit Selling price Machine Hours per Unit Total Sales Dollars Variable Cost per Unit Total Contribution Dollars Contribution Dollars per Unit Contribution Margin Percentage Item #1 $65,000 10000 $25,000 $2,000 22500 $10 Item #2 $55,000 20000 $22,000 $2,500 23000 $8 Item #3 $42,000 7500 $15,000 $1,750 27500 $7 Item #4 $27,000 5000 $5,000 $500 11000 $6 Complete the grey cells in the above table Which product would...

Variable Direct Costs Machine Hours Fixed Production Costs Fixed Overhead Costs Units Sold Unit Selling price...

Variable Direct Costs Machine Hours Fixed Production Costs Fixed Overhead Costs Units Sold Unit Selling price Machine Hours per Unit Total Sales Dollars Variable Cost per Unit Total Contribution Dollars Contribution Dollars per Unit Contribution Margin Percentage Item #1 $65,000 10000 $25,000 $2,000 22500 $10 Item #2 $55,000 20000 $22,000 $2,500 23000 $8 Item #3 $42,000 7500 $15,000 $1,750 27500 $7 Item #4 $27,000 5000 $5,000 $500 11000 $6 Complete the grey cells in the above table Which product would...

Do you think it makes sense to separate product costs from period costs for management purposes?...

Do you think it makes sense to separate product costs from period costs for management purposes? What about for external reporting purposes? Why or why not? Should the costs be treated differently for management and external reporting purposes?

Question

When you are given a manufactured overhead costs how do you separate that into fixed and...

Solutions

Expert Solution

Related Solutions

How do you calcuate the Fixed Overhead (FOH) spending variance and the Fixed Overhead (FOH) production...

What is pre-determined overhead rate and how is it calculated? What do you do when the...

The Alphonse Company allocates fixed overhead costs by machine hours and variable overhead costs by direct...

Garrison Managerial Accounting pg. 560 #3. Do traceable fixed manufacturing overhead and common fixed costs have...

1) How do you calculate and incorporate fixed manufacturing overhead cost into cost of goods sold...

What are examples of fixed and variable costs in a fast food restaurant? How do you...

how to control fixed overhead cost

Variable Direct Costs Machine Hours Fixed Production Costs Fixed Overhead Costs Units Sold Unit Selling price...

Variable Direct Costs Machine Hours Fixed Production Costs Fixed Overhead Costs Units Sold Unit Selling price...

Do you think it makes sense to separate product costs from period costs for management purposes?...