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High-Low and Cost Formula Harrison Company has accumulated the following total manufacturing overhead costs for two...

High-Low and Cost Formula

Harrison Company has accumulated the following total manufacturing overhead costs for two levels of activity (within the relevant range):

Low High
Activity (direct labor hours) 90,000 130,000
Total manufacturing overhead $484,000 $628,000

The total overhead cost includes variable, fixed, and mixed costs. At 130,000 direct labor hours, the total cost breakdown is as follows:

Variable cost $286,000
Fixed cost 85,000
Semi-mixed cost $257,000

a. Using the high-low method of cost analysis, determine the variable portion of the semi-variable cost per direct labor hour. Determine the total fixed cost component of the mixed cost.

Isolate mixed costs:

Do not use negative signs with your answers.

Low High
Total cost Answer Answer
Less: Variable cost Answer Answer
Fixed cost Answer Answer
Total mixed cost Answer Answer

High-Low Analysis:
Round variable portion per unit to two decimal places, if applicable.

Direct Labor Hours Total Mixed Cost - Variable Portion = Fixed Portion
High Answer Answer

-

 Answer

=

 Answer
Low Answer Answer Answer Answer
Difference Answer Answer

Variable portion per unit: $Answer

b. What should the total planned overhead cost be at 115,000 direct labor hours?

Variable Cost Per Unit Fixed Costs
Variable cost Answer
Fixed cost Answer
Mixed:
Variable portion Answer
Fixed portion Answer
Totals: Answer Answer

Total planned overhead for 115,000 direct labor hours $Answer

  

Solutions

Expert Solution

Labor Hours 90000 130000
Low High
Total cost 484000 628000
Less: Variable cost 198000 286000
Fixed cost 85000 85000
Total mixed cost 201000 257000
Direct Labor Hours Total Mixed Cost Variable Portion Fixed Portion
High 130000 257000 182000 75000
Low 90000 201000 126000 75000
Difference 40000 56000
Varibale portion per unit = 56000/40000 = $1.4 per hour
b.
Variable Cost Per Unit Fixed Costs
Variable cost 2.2
Fixed cost 85000
Mixed:
Variable portion 1.4
Fixed portion 75000
Totals: 3.6 160,000
Total planned overhead = 3.6*115000 + 160,000 = $574,000

ekkarill92 answered 3 years ago
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