Question
In: Accounting
At the high and low levels of activity during the month, direct labor hours are 90,000...
At
the high and low levels of activity during the month, direct labor
hours are 90,000 and 40,000, respectively. The related costs are
$165,000 and $100,000. What are the fixed and variable costs at any
level of activity?
Solutions
Expert Solution
Answer- Variable Cost per hour = $1.3 per hour.
Total variable cost at 90000 direct labor hours = $117000.
Total fixed costs = $48000.
Explanation:-High-Low Method:-
Variable Cost per Unit
Variable cost per unit (b) is calculated using the following formula:
|
Variable cost per unit = (Y2-Y1)/(X2-X1) |
|
Where,
y2 is the total cost at highest level of activity;
y1 is the total cost at lowest level of activity;
x2 are the number of units/miles/ labor ,machine hours etc. at
highest level of activity; and
x1 are the number of units/miles/ labor, machine hours etc. at
lowest level of activity
The variable cost per unit is equal to the slope of the cost volume line (i.e. change in total cost ÷ change in number of machine hours).
Total Fixed Cost
Total fixed cost (a) is calculated by subtracting total variable cost from total cost, thus:
|
Total Fixed Cost = (y2 – b)*x2 = (y1 – b*x1) |
We have,
at highest activity: x2 = 90000 hours;
y2 = $165000
at lowest activity: x1 = 40000 hours;
y1 = $100000
Variable Cost per labor hour = ($165000 - $100000) /(90000 hours − 40000 hours)
= $65000/50000 hours
= $1.3 per hour
Total variable cost on 90000 hours = 90000 hours*$1.3 per hour
= $117000
Total fixed costs= $165000 - $117000
= $48000
ekkarill92 answered 2 years agoRelated Solutions
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...
Johnson Company applies overhead to products using direct labor hours as the activity level. During 2019,...
Johnson Company applies overhead to products using direct labor hours
as the activity level. During 2019, Johnson Company had the following
estimated costs:
Direct materials .................... $278,000
Direct labor ........................ 255,000 (15,000 hours expected)
Advertising ......................... 37,000
Rent on factory building ............ 38,000
Depreciation .................... ... 60,000
Indirect materials .................. 20,000
Sales commissions ................... 40,000
Production supervisor's salary ...... 50,000
Insurance on factory equipment ...... 18,000
CEO's salary ........................ 95,000
The following additional information is available:
1. 30% of the...
MAnufacturing overhead is applied on the basis of direct labor hours. The direct labor hours for...
MAnufacturing overhead is applied on the basis of direct labor
hours. The direct labor hours for the period are 500 and the
estimated manufacturing overhead is 2000. actual direct labor hours
were 160 and actual overhead was 1000.
Compute the manufacturing overhead applied during this
period.
Overhead is applied on the basis of direct labor hours. Three direct labor hours are required...
Overhead is applied on the basis of
direct labor hours. Three direct labor hours are required for each
product unit. Planned production for the period was set at 8,000
units. Manufacturing overhead for the period is budgeted at
$204,000, of which 30 percent is fixed. The 26,200 hours worked
during the period resulted in production of 8,500 units.
Manufacturing overhead cost incurred was $220,500.
Required:
a. Calculate the overhead spending
variance:
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c. Calculate the...
James Corp. applies overhead on the basis of direct labor hours. For the month of May,...
James Corp. applies overhead on the basis of direct labor hours.
For the month of May, the company planned production of 10,000
units (80% of its production capacity of 12,500 units) and prepared
the following overhead budget:
Operating Levels
Overhead Budget
80%
Production in units
10,000
Standard direct labor hours
36,000
Budgeted overhead
Variable overhead costs
Indirect materials
$
21,600
Indirect labor
36,000
Power
7,200
Maintenance
3,600
Total variable costs
68,400
Fixed overhead costs
Rent of factory building
20,000
Depreciation—Machinery...
James Corp. applies overhead on the basis of direct labor hours. For the month of May,...
James Corp. applies overhead on the basis of direct labor hours.
For the month of May, the company planned production of 10,000
units (80% of its production capacity of 12,500 units) and prepared
the following overhead budget:
Operating Levels
Overhead
Budget
80%
Production in
units
10,000
Standard direct
labor hours
26,000
Budgeted
overhead
Variable
overhead costs
Indirect
materials
$
15,600
Indirect
labor
26,000
Power
7,800
Maintenance
2,600
Total variable
costs
52,000
Fixed overhead
costs
Rent of factory
building
22,000
Depreciation—Machinery...
James Corp. applies overhead on the basis of direct labor hours. For the month of May,...
James Corp. applies overhead on the basis of direct labor hours.
For the month of May, the company planned production of 10,000
units (80% of its production capacity of 12,500 units) and prepared
the following overhead budget:
Operating Levels
Overhead Budget
80%
Production in units
10,000
Standard direct labor hours
30,000
Budgeted overhead
Variable overhead costs
Indirect materials
$
21,000
Indirect labor
30,000
Power
6,000
Maintenance
3,000
Total variable costs
60,000
Fixed overhead costs
Rent of factory building
14,000
Depreciation—Machinery...
James Corp. applies overhead on the basis of direct labor hours. For the month of May,...
James Corp. applies overhead on the basis of direct labor hours.
For the month of May, the company planned production of 10,000
units (80% of its production capacity of 12,500 units) and prepared
the following overhead budget:
Operating Levels
Overhead Budget
80%
Production in units
10,000
Standard direct labor hours
27,000
Budgeted overhead
Variable overhead costs
Indirect materials
$
16,200
Indirect labor
27,000
Power
5,400
Maintenance
5,400
Total variable costs
54,000
Fixed overhead costs
Rent of factory building
23,000
Depreciation—Machinery...
James Corp. applies overhead on the basis of direct labor hours. For the month of May,...
James Corp. applies overhead on the basis of direct labor hours.
For the month of May, the company planned production of 10,000
units (80% of its production capacity of 12,500 units) and prepared
the following overhead budget:
Operating Levels
Overhead
Budget
80%
Production in
units
10,000
Standard direct
labor hours
27,000
Budgeted
overhead
Variable
overhead costs
Indirect
materials
$
16,200
Indirect
labor
27,000
Power
5,400
Maintenance
5,400
Total variable
costs
54,000
Fixed overhead
costs
Rent of factory
building
23,000
Depreciation—Machinery...
James Corp. applies overhead on the basis of direct labor hours. For the month of May,...
James Corp. applies overhead on the basis of direct labor hours.
For the month of May, the company planned production of 10,000
units (80% of its production capacity of 12,500 units) and prepared
the following overhead budget:
Operating Levels
Overhead Budget
80%
Production in units
10,000
Standard direct labor hours
20,000
Budgeted overhead
Variable overhead costs
Indirect materials
$
15,000
Indirect labor
20,000
Power
5,000
Maintenance
2,000
Total variable costs
42,000
Fixed overhead costs
Rent of factory building
15,000
Depreciation—Machinery...
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