Using activity analysis, AAA Company has identified the appropriate cost driver for maintenance costs in a...

Using activity analysis, AAA Company has identified the appropriate cost driver for
maintenance costs in a factory as the number of machine hours. The maintenance costs have been
observed as follows within the relevant range of 5,000 to 8,000 machine-hours.
Month Maintenance Cost Machine Hours
January $7,100 5,600
February $8,500 7,100
March $7,400 5,000
April $8,200 6,500
May $9,950 7,300
June $9,800 8,000
July $7,800 6,200
Using the high-low method, determine the variable maintenance cost per machine hour and the
monthly fixed maintenance cost. Estimate the total variable maintenance costs and fixed maintenance
costs if 6250 Machine hours are projected to be used next month.

Solutions

Expert Solution

Variable cost per hour= (Highest activity cost - Lowest activity cost)/(Highest activity - Lowest activity)

= (9,800-7,400)/(8,000-5,000)

= 2,400/3,000

= 0.8 per hour

Fixed cost = Highest activity cost - Highest activity x Variable cost per hour

= 9,800 - (8,000 x 0.8)

= 9,800-6,400

= $3,400

The estimated month overhead costs when expect the plant to operate at a monthly average of 6,250 machine hours

= Fixed cost + Variable cost per hour x Activity hour

= 3,400 + 0.8 x 6,250

= 3,400+5,000

= $8,400

Please give a positive rating if you are satisfied with this solution and if you have any query kindly ask.

Thanks!!!

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Fischer Company identified the following activities, costs, and activity drivers: Activity Expected Costs Expected Activity Handling...

Fischer Company identified the following activities, costs, and activity drivers: Activity Expected Costs Expected Activity Handling Parts 425,000 25,00 parts in stock Inspecting Parts 390,000 940 batches Processing Purchase Orders 220,000 440 orders Designing Packaging 230,000 5 models a. Compute a plantwide overhead rate assuming the company assigns overhead based on 70,000 budgeted direct labor hours (Round to two decimals). b. Compute separate rates for each of the four activities using the activity-based costing.

Fellar Corp. has identified the following information: Activity cost pools Materials handling $39,200 Machine maintenance 32,560...

Fellar Corp. has identified the following information: Activity cost pools Materials handling $39,200 Machine maintenance 32,560 Cost drivers Number of material moves 700 Number of machine hours 74,000 Required: 1. Calculate the activity rate for each cost pool. (Round your answers to 2 decimal places.) 2. Determine the amount of overhead assigned to Fellar’s products if they have the following activity demands: (Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.) Product...

Selecting the appropriate cost driver is the key to effective activity based costing. Identify three overhead...

Selecting the appropriate cost driver is the key to effective activity based costing. Identify three overhead elements in a simple product your current or former employer makes, and identify what you think the best cost driver would be for each element. 100 words or more. NB/ My place of work is a food processing company

27) A preliminary stage cost driver links costs of resources consumed in an activity center to:...

27) A preliminary stage cost driver links costs of resources consumed in an activity center to: 1. batch-level activities 2. products 3. cost functions 4. focused factories 5. other activity centers 28)In the step method of service center allocation, the number of allocation steps equals the number of: 1. activities performed in all operating departments. 2. service centers. 3. operating departments. 4. service centers plus operating departments. 5. activities performed in all service centers. 30)Activity based costing: 1. uses fewer...

2) Gable Company uses three activity cost pools. Each pool has a cost driver. Information for...

2) Gable Company uses three activity cost pools. Each pool has a cost driver. Information for Gable Company follows: Activity Cost Pools Total Cost of Pool Cost Driver Estimated Cost Driver Machining $ 380,120 Number of machine hours 88,400 Designing costs 86,400 Number of design hours 9,000 Setup costs 74,672 Number of batches 525 Suppose that Gable Company manufactures three products, A, B, and C. Information about these products follows: Product A Product B Product C Number of machine hours...

Gable Company uses three activity cost pools. Each pool has a cost driver. Information for Gable...

Gable Company uses three activity cost pools. Each pool has a cost driver. Information for Gable Company follows: Activity Cost Pools Total Cost of Pool Cost Driver Estimated Cost Driver Machining $ 259,000 Number of machine hours 85,600 Designing costs 59,000 Number of design hours 7,800 Setup costs 72,000 Number of batches 370 Required: 1. Compute the activity rate for each activity. (Round your answers to 2 decimal places.) Activity Activity Rate Machining per Machine Hrs Design Costs per Design...

DAB Company has identified the following overhead activities, costs, and activity drivers for the coming year:...

DAB Company has identified the following overhead activities, costs, and activity drivers for the coming year: Activity Expected Cost Activity Driver Activity Capacity Material-handling costs.. £45,000 Number of moves......... 450 Machine costs................ £80,000 Machine hours.............. 20,000 Order costs.................... £15,000 Number of orders......... 750 Receiving costs.............. £30,000 Number of parts........... 50,000 Setup costs.................... £50,000 Number of setups......... 250 Assume that each activity corresponds to a process. DAB’s normal activity is 5,000 direct labor hours. The following two jobs...

The following budgeted information is available for Zeta Company: Activity Budgeted Cost Activity Driver Consumption of...

The following budgeted information is available for Zeta Company: Activity Budgeted Cost Activity Driver Consumption of Drivers for Zeta’s Product Lines Total Activity Driver Product A Product B Processing & Testing Developing test programs $400,000 Engineering hours 10,000 2,500 7,500 Making probe cards 58,750 Development hours 4,000 400 3,600 Testing products 300,000 Test hours 20,000 2,000 18,000 Setups 40,000 Number of batches 100 55 45 Engineering design 80,000 Number of change orders 60 9 51 Handling lots 90,000 Number of...

THE Company applies overhead costs to jobs using direct labor cost as an activity. For the...

THE Company applies overhead costs to jobs using direct labor cost as an activity. For the current year, THE Company reported estimated overhead cost of $500,000 while the actual overhead cost totaled $510,000. THE's estimated direct labor cost was $200,000 while the actual direct labor cost was $220,000. For the current year, overhead was: Group of answer choices under-applied by $10,000 under-applied by $20,000 under-applied by $30,000 under-applied by $40,000 over-applied by $10,000 over-applied by $20,000 over-applied by $30,000 over-applied...

Activity Driver Driver Frequency Cost of Activity Direct Labor Direct Labor Hours 50,000 $ 1,250,000.00...

Activity Driver Driver Frequency Cost of Activity Direct Labor Direct Labor Hours 50,000 $ 1,250,000.00 Vacuuming Machine Hours 2,000 $ 62,000.00 Set-up Job 5,000 $ 200,000.00 Testing Tests made 5,000 $ 60,000.00 Customer service Orders taken 1,200 $ 30,000.00 Invoicing Invoices mailed 2,400 $ 48,000.00 Total $ 1,650,000.00 Activity Pool Opening Pump Repair Pool Cleaning Materials 350 1000 50 Direct Labor Hours 15 40 2 Vacuuming 3 0 2 Set-up 1 1 1 Testing...

Subjects