Question

In: Accounting

27) Lichtenstein Imports needs to determine the variable utilities rate per machine hour in order to...

27) Lichtenstein Imports needs to determine the variable utilities rate per machine hour in order to estimate cost for August. Relevant information is as follows.

Month Machine Hours Worked Utilities Cost

April 4,500 $9,560

May 4,200 $9,440

June 6,500 $10,725

July 7,000 $11,400

Lichtenstein anticipates producing 5,000 units in August, each unit requiring 1.5 hours of machine time.

The company uses the high-low method to analyze costs.

Required:

A. Calculate the variable and fixed components of the utilities cost.

B. Using the data calculated above, estimate the utilities cost for August.

C. Compare the high-low method versus the visual-fit method with respect to (1) number of data observations used in the analysis and (2) objectivity of the results.

Solutions

Expert Solution

Solution:

The company uses the high-low method to analyze costs.

	Machine hours	Total costs
High activity level - july	7,000	$11,400
Low activity level - may	4,200	$9,440
Differece	2,800	$1,960

Answer (A): The variable and fixed components of the utilities cost:

Variable rate = (change in cost / change in activity)

= $1,960 / 2,800 Nos

= $0.70 per machine hour

Fixed cost = $11,400 - (7,000 Nos * $0.70) (variable costs)

Fixed cost = $6,500

Answer (B): The utilities cost for August:

Machine hours - August = 5,000 units * 1.50 hours

= 7,500 hours

Utilities cost - August = $6,500 (fixed cost) + ($0.70 * 7,500 machine hours)

Utilities cost- August = $11,750

Answer (C):

1. Number of data observations used in the analysis:

1. No of data observations used in the analysis:

We just watch two focuses, that is most astounding and the least. Though, Visual fit strategy, uses every one of the information focuses. Visual fit point is more favorable in number of information perceptions.

2. Objectivity of the result:

Visual fit strategy needs add up to objectivity as cost line is fit between the information focuses through visual estimate. The high low point is more worthwhile in objectivity of results.

ekkarill92 answered 11 months ago

Next > < Previous

Related Solutions

Googlish Imports needs to determine the variable utilities rate per machine hour in order to estimate...

Googlish Imports needs to determine the variable utilities rate per machine hour in order to estimate cost for August. Relevant information is as follows. Month Machine Hours Worked Utilities Cost April 4,750 9,810 May 4,700 9,690 June 7,000 11,225 July 8,000 12,400 Googlish anticipates producing 5,500 units in August, each unit requiring 3.0 hours of machine time. The company uses the high-low method to analyze costs. Required: A. Calculate the variable and fixed components of the utilities cost. B. Using...

(1 point) Bacteria grow at a rate of 27% per hour in a petri dish. If...

(1 point) Bacteria grow at a rate of 27% per hour in a petri dish. If there are initially 100 bacteria and a carrying capacity of 500000 cells, how long does it take to reach 94000 cells? t = _____ hours

If overhead is applied on the basis of machine hours, what will be the overhead rate per hour?

Simplex Company has the following estimated costs for next year: Simplex estimates that 10,000 direct labour and 16,000 machine hours will be worked during the year. If overhead is applied on the basis of machine hours, what will be the overhead rate per hour?

Edison Corporation's variable manufacturing overhead rate is $5.00 per direct labor-hour.

Edison Corporation's variable manufacturing overhead rate is $5.00 per direct labor-hour. Total budgeted fixed overhead is $25,000 per month. The $25,000 per month includes $7,000 in depreciation expense. Total budgeted direct labor-hours for the month of July is 20,000. Based on the month of July only, the predetermined overhead rate is $ (Enter your answer as a number rounded to 2 decimal places.)

Gallop, Inc. budgeted its variable overhead application rate as $0.25 per direct labor hour. Actual variable...

Gallop, Inc. budgeted its variable overhead application rate as $0.25 per direct labor hour. Actual variable overhead cost for the period is $9,700. If the actual number of labor hours worked during the period are 38,500 and if there is a total unfavorable flexible variable overhead variance of $230, calculate the standard number of direct labor hours allowed for the output achieved by Gallop within this period. a. 38,500 b. 37,880 c. 37,920 d. 39,720 Can you please indicate the...

1. The predetermined manufacturing overhead rate is $18 per machine hour based on an estimated manufacturing...

1. The predetermined manufacturing overhead rate is $18 per machine hour based on an estimated manufacturing overhead of 180,000 and 10,000 machine hours. For the year the actual overhead was 200,000 and machine hours were 11,000. How much manufacturing overhead was applied during the year? a. 198,000 b. 200,000 c. none of the above 2. Overapplied manufacturing overhead that is not material is adjusted by which entry? a. debit manufacturing overhead and credit misc exp b. debit cash and credit...

Estimated variable manufacturing overhead $25 per machine hour Estimated fixed manufacturing overhead $67,100 Estimated machine-hours 6,100...

Estimated variable manufacturing overhead $25 per machine hour Estimated fixed manufacturing overhead $67,100 Estimated machine-hours 6,100 Actual manufacturing overhead $231,500 Actual machine-hours 6,250 The estimates of the manufacturing overhead and of machine-hours were made at the beginning of the year for the purpose of computing the company's predetermined overhead rate for the year. The applied manufacturing overhead for the year is:

72) Keeran Corporation estimates that its variable manufacturing overhead is $5.20 per machine-hour and its fixed...

72) Keeran Corporation estimates that its variable manufacturing overhead is $5.20 per machine-hour and its fixed manufacturing overhead is $242,048 per period. If the denominator level of activity is 6,200 machine-hours, the predetermined overhead rate would be: A) $520.00 per machine-hour B) $5.20 per machine-hour C) $44.24 per machine-hour D) $39.04 per machine-hour 73) Fleming Incorporated makes a single product—a critical part used in commercial airline seats. The company has a standard cost system in which it applies overhead to...

Keeran Corporation estimates that its variable manufacturing overhead is $6.50 per machine-hour and its fixed manufacturing...

Keeran Corporation estimates that its variable manufacturing overhead is $6.50 per machine-hour and its fixed manufacturing overhead is $280,080 per period. If the denominator level of activity is 7,200 machine-hours, the predetermined overhead rate would be: Multiple Choice $650.00 per machine-hour $38.90 per machine-hour $6.50 per machine-hour $45.40 per machine-hour

Amethyst has a standard variable overhead rate of $5 per direct labour hour. The standard quantity...

Amethyst has a standard variable overhead rate of $5 per direct labour hour. The standard quantity of direct labour per unit of production is 2 hours. The company's static budget was based on 50,000 units. Actual results for the year are as follows. Actual units produced 45,000 Actual direct labour hours 100,000 Actual variable overhead $495,000 The time has come for the company to compare of actual results with planned results. Required a) What is the company’s (i) static budget...

Subjects