A Manufacturing Company Whose Total Factory Overhead Cost Fluctuate Considerably From Year ... Question: A manufacturing...

A Manufacturing Company Whose Total Factory Overhead Cost Fluctuate Considerably From Year ... Question: A manufacturing company whose total factory overhead cost fluctuate considerably from year to yea... A manufacturing company whose total factory overhead cost fluctuate considerably from year to year according to increases and decreases in the number of direct labor-hours worked in the factory. Total factory overhead costs at high and low levels of activity for recent years are Low: 52800, High: 70,400, Total factory overhead cost $279,380 Low, and $316,340 High. The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 52,800-hour level of activity as: indirect materials (variable) $89,760, rent (fixed) 138,000, maintenance (mixed) 51,620, total factory overhead cost: $279,380. Estimate how much of the $316,340 factory overhead cost at the high level of activity consist of maintenance cost. First determine how much of $316,340 consist of indirect materials and rent. Maintenance cost at high level of activity is Using the high-low method estimate a cost formula for maintenance (round the variable cost per DLH to 2 decimal places) High level of activity, low level of activity, change, variable cost element fixed cost element Y=------+--------x What total factory overhead cost would you expect the company to incur at an operating level of 58,080 direct labor-hours?

Solutions

Expert Solution


		Variable	Fixed	Mixed
Activity level(hour)	Factory overhead	Indirect Materials	Rent	Maintenance
52800	$279,380	$89,760	$138,000	$51,620
70400	$316,340

Indirect material at 70400 hours	$ 119,680	(89760/52800)*70400)
Rent at 70400 hours level	$138,000
Maintenance cost at70400 level	$58,660	(316340-119680-138000)
Total Factory overhead at 70400	$ 316,340

Maintenance cost at high level	$58,660
Maintenance cost at low level	$51,620

Y=a+bX
Y2=High Level
Y1=Low level
Y2=a+bX2
Y1=a+bX1
(Y2-Y1)=b(X2-X1)
b=(Y2-Y1)/(X2-X1)
In this case,
b=(Y2-Y1)/(X2-X1)
b=(58660-51620)/(70400-52800)
b=	0.40
Y2=a+bX2
58660=a+0.4*70400
a=58660-(0.4*70400)	30500
The Required Formula for Maintenance cost:
Y=30500+0.4X
Y=Maintenance cost
X=activity level
At operating level58080 hours;
Maintenance cost=30500+0.4*58080	$ 53,732
Variable indirect material	$ 98,736	(89760/52800)*58080
Rent	$138,000
Total factory overhead cost	$ 290,468

ekkarill92 answered 10 months ago

Next > < Previous

Related Solutions

GIOJ is a manufacturing company whose total factory overhead costs fluctuate considerably from year to year...

GIOJ is a manufacturing company whose total factory overhead costs fluctuate considerably from year to year according to increases and decreases in the number of direct labor-hours worked in the factory. Total factory overhead costs at high and low levels of activity for recent years are given below: Level of Activity Low High Direct labor-hours 48,300 64,400 Total factory overhead costs $ 269,360 $ 304,780 The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has...

Sawaya Co., Ltd., of Japan is a manufacturing company whose total factory overhead costs fluctuate considerably...

Sawaya Co., Ltd., of Japan is a manufacturing company whose total factory overhead costs fluctuate considerably from year to year according to increases and decreases in the number of direct labor-hours worked in the factory. Total factory overhead costs at high and low levels of activity for recent years are given below: Level of Activity Low High Direct labor-hours 47,100 62,800 Total factory overhead costs $ 249,500 $ 280,900 The factory overhead costs above consist of indirect materials, rent, and...

Sawaya Co., Ltd., of Japan is a manufacturing company whose total factory overhead costs fluctuate considerably...

Sawaya Co., Ltd., of Japan is a manufacturing company whose total factory overhead costs fluctuate considerably from year to year according to increases and decreases in the number of direct labor-hours worked in the factory. Total factory overhead costs at high and low levels of activity for recent years are given below: Level of Activity Low High Direct labor-hours 45,600 60,800 Total factory overhead costs $ 234,300 $ 257,100 The factory overhead costs above consist of indirect materials, rent, and...

Sawaya Co., Ltd., of Japan is a manufacturing company whose total factory overhead costs fluctuate considerably...

Sawaya Co., Ltd., of Japan is a manufacturing company whose total factory overhead costs fluctuate considerably from year to year according to increases and decreases in the number of direct labor-hours worked in the factory. Total factory overhead costs at high and low levels of activity for recent years are given below: Level of Activity Low High Direct labor-hours 74,700 99,600 Total factory overhead costs $ 303,860 $ 348,680 The factory overhead costs above consist of indirect materials, rent, and...

Colby Limited is a manufacturing company whose total factory overhead costs fluctuate somewhat from year to year

Colby Limited is a manufacturing company whose total factory overhead costs fluctuate somewhat from year to year, according to the number of machine-hours worked in its production facility. These costs at high and low levels of activity over recent years are given below: Low High Machine-hours 50,000 75,000 Total factory overhead costs $14,250,000 $17,625,000 The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 50,000 machine-hours level of activity as...

The following information is available from the Terry Company: Actual total factory overhead cost incurred $...

The following information is available from the Terry Company: Actual total factory overhead cost incurred $ 25,000 Actual fixed overhead cost incurred $ 10,400 Budgeted fixed overhead expenses $ 11,000 Actual direct labor hours (DLH) worked 4,400 Standard DLHs for this period’s production (output) 4,000 Standard variable overhead rate per DLH $ 3.00 Standard fixed overhead rate per DLH $ 2.50 What is the fixed overhead production volume variance for Terry Company for the period, to the nearest whole dollar?...

Applying Factory Overhead Salinger Company estimates that total factory overhead costs will be $175,000 for the...

Applying Factory Overhead Salinger Company estimates that total factory overhead costs will be $175,000 for the year. Direct labor hours are estimated to be 25,000. a. For Salinger Company, determine the predetermined factory overhead rate using direct labor hours as the activity base. If required, round your answer to two decimal places. $ per direct labor hour b. During August, Salinger Company accumulated 590 hours of direct labor costs on Job 40 and 840 hours on Job 42. Determine the...

Applying Factory Overhead Darling Company estimates that total factory overhead costs will be $493,000 for the...

Applying Factory Overhead Darling Company estimates that total factory overhead costs will be $493,000 for the year. Direct labor hours are estimated to be 29,000. a. For Darling Company, determine the predetermined factory overhead rate using direct labor hours as the activity base. $ per direct labor hour b. During May, Darling Company accumulated 640 hours of direct labor costs on Job 200 and 890 hours on Job 305. Determine the amount of factory overhead applied to Jobs 200 and...

Flexible Overhead Budget Leno Manufacturing Company prepared the following factory overhead cost budget for the Press...

Flexible Overhead Budget Leno Manufacturing Company prepared the following factory overhead cost budget for the Press Department for October of the current year, during which it expected to require 18,000 hours of productive capacity in the department: Variable overhead cost: Indirect factory labor $165,600 Power and light 5,760 Indirect materials 46,800 Total variable overhead cost $218,160 Fixed overhead cost: Supervisory salaries $76,360 Depreciation of plant and equipment 48,000 Insurance and property taxes 30,540 Total fixed overhead cost 154,900 Total factory...

Flexible Overhead Budget Leno Manufacturing Company prepared the following factory overhead cost budget for the Press...

Flexible Overhead Budget Leno Manufacturing Company prepared the following factory overhead cost budget for the Press Department for October of the current year, during which it expected to require 9,000 hours of productive capacity in the department: Variable overhead cost: Indirect factory labor $76,500 Power and light 2,790 Indirect materials 21,600 Total variable overhead cost $100,890 Fixed overhead cost: Supervisory salaries $35,310 Depreciation of plant and equipment 22,200 Insurance and property taxes 14,120 Total fixed overhead cost 71,630 Total factory...

Subjects