Question

In: Accounting

(1) Fromme's Frocks has the following machine hours and production costs for the last six months...

(1) Fromme's Frocks has the following machine hours and production costs for the last six months of last year:

Month Machine Hours Production Cost
July 17,000 $ 12,175
August 15,500 12,800
September 13,500 9,820
October 17,500 12,280
November 16,800 11,792
December 14,100 9,982

If Fromme expects to incur 12,600 machine hours in January, what will be the estimated total production cost using the high-low method?

(A) $20,029.00.

(B) $8,841.60.

(C) $7,749.00.

(D) $9,266.50.

(3) Case (A) Case (B) Case (C)
Beginning Balance (BB) $ 49,520 $ 16,400 $ 6,900
Ending Balance (EB) ? 12,700 13,500
Transferred In (TI) 179,200 ? 82,700
Transferred Out (TO) 177,400 106,200 ?


For Case (A) above, what is the Ending Balance (EB)?

(A) $51,320.

(B) $49,520.

(C) $46,020.

(D) $47,720.

(4)The Crater Manufacturing Company recorded overhead costs of $14,382 at an activity level of 5,200 machine hours and $8,037 at 2,500 machine hours. The records also indicated that overhead of $9,830 was incurred at 2,800 machine hours. What is the variable cost per machine hour using the high-low method to estimate the cost equation?

(A) $1.90.

(B) $2.77.

(C) $2.35.

(D) $3.51.

Solutions

Expert Solution

Variable cost per machine hour under the High-Low method = (Total cost at highest machine hours - Total cost at lowest machine hours) / (Highest machine hours - Lowest machine hours)

= ($12,280 - $9,820) / (17,500 - 13,500)

= $2,460 / 4,000

= $0.615

Fixed cost = Total cost - Variable cost

= $12,280 - (17,500*$0.615)

= $1,517.5

Estimated total production cost = Variable cost + Fixed cost

= (12,600*$0.615) + $1,517.5

= $9,266.5

The answer is D.

----------------------------------------------------------------------------

Ending balance = Beginning balance + Transferred in - Transferred out

= $49,520 + $179,200 - $177,400

= $51,320

The answer is A.

----------------------------------------------------------------------------

Variable cost per machine hour under the High-Low method = (Total cost at highest machine hours - Total cost at lowest machine hours) / (Highest machine hours - Lowest machine hours)

= ($14,382 - $8,037) / (5,200 - 2,500)

= $6,345 / 2,700

= $2.35

The answer is C.

ekkarill92 answered 1 year ago
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