Question

Lansing Mfg. prepared the following annual abbreviated flexible budget for different levels of machine hours:

	40,000	44,000	48,000	52,000
Variable manufacturing overhead	$80,000	$88,000	$96,000	$104,000
Fixed manufacturing overhead	325,000	325,000	325,000	325,000

Each product requires four hours of machine time and the company expects to produce 10,000 units for the year. Assume that Lansing Mfg. has decided to use units of production to apply overhead to production. In April of the current year, the company produced 900 units and incurred $7,500 and $26,500 of variable and fixed overhead, respectively.

a. What amount of variable manufacturing overhead should be applied to production in April?
Applied VOH $Answer

b. What amount of fixed manufacturing overhead should be applied to production in April?
Applied FOH $Answer

c. Calculate the under- or overapplied variable and fixed overhead for April.
Note: Do not use negative signs with your answers.

Variable OH		OverappliedUnderappliedNeither over- or underapplied
Fixed OH		OverappliedUnderappliedNeither over- or underapplied

La Mia’s Casas builds replicas of residences of famous and infamous people. The company is highly automated, and the new accountant-owner has decided to use machine hours as the basis for predicting maintenance costs. The following data are available from the company’s most recent eight months of operations:

Machine Hours	Maintenance Costs
4,000	$1,470
7,000	1,200
3,500	1,680
6,000	1,100
3,000	1,960
9,000	880
8,000	1,020
5,500	1,200

a. Using the high-low method, determine the cost formula for maintenance costs with machine hours as the basis for estimation.

Total cost = $Answer

+ $Answer

X

Answer 1