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In: Accounting

Tidwell Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at...

Tidwell Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year.

Activity Cost Pool Cost Driver Est. Overhead Cost Driver Activity

Ordering and Receiving Orders $ 120,000 500 orders

Machine Setup Setups 297,000 450 setups

Machining Machine hours 1,500,000 125,000 MH

Assembly Parts 1,200,000 1,000,000 parts

Inspection Inspections 300,000 500 inspections

If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is

a. $9.60.

b. $12.00.

c. $15.00.

d. $34.17.

In applying the high-low method, what is the unit variable cost?

Month Miles Total Cost

January 80,000 $192,000

February 50,000 160,000

March 70,000 158,000

April 90,000 260,000

a. $2.88

b. $2.50

c. $3.20

d. Cannot be determined from the information given.

Continue on previous question. In applying the high-low method, what is the fixed cost?

a. $35,000

b. $72,000

c. $28,000

d. $100,000

Expert Solution

Q 1: If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is


	Applied overhead rate = Total expected cost / Total direct labor hr

		=(120000+297000+1500000+1200000+300000)/100000
		34.17

	therefore correct answer is option d $34.17


Q2 : In applying the high-low method, what is the unit variable cost?

		Miles	Total cost
	High	90000	260000
	Low	50000	160,000
	difference	40,000	100,000

	Therefore variable cost per unit = 100000/40000 =			2.5

	answer = option b $2.5

Q3 : Continue on previous question. In applying the high-low method, what is the fixed cost?

	Fixed cost= =260000-90000*2.5

			35000
	Answer = option a $35000

ekkarill92 answered 6 months ago

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