Question

In: Accounting

A Company manufactures a product A. The company estimates the cost function for the total costs.

A Company manufactures a product A.  The company estimates the cost function for the total costs. The cost driver is number of units.  The following  informations were collected:

 

Month                     Units                                               Total Costs

January                     3,560                                             $242,400

February                   3,800                                             $252,000

March                       4,000                                             $260,000

April                         3,600                                             $244,000

May                          3,200                                             $228,000

June                          3,040                                             $221,600

 

Compute a cost function using the high-low method.


Solutions

Expert Solution

TCHA =Total cost of high activity, HAU=Highest activity unit

·         Variable Cost = (TCHATotal Cost of Low Activity) / (HAU - Lowest Activity Unit) = (260000-220000) / (4000-3040) = 40.625

·         Total Cost = (VC * Units Produced) + Total Fixed Cost

·         Fixed cost = Highest activity cost – (Variable cost per unit x Highest activity units) = 260000-(40.625*4000) = 97500



Related Solutions

Calico Joe Fabrics sells a single product. The company estimates total fixed costs at $360,000 with...
Calico Joe Fabrics sells a single product. The company estimates total fixed costs at $360,000 with demand and unit variable costs at various activity levels as follows: Units Demanded Unit Price Total Variable Costs 73,000 $31 $1,606,000 83,000 30 1,826,000 93,000 29 2,046,000 103,000 28 2,266,000 113,000 27 2,486,000 How much profit will Calico Joe Fabrics have if a price of $26 is charged and demand is 120,000? $480,000 $2,760,000 $3,120,000 $120,000
AD Company estimates that variable costs will be 70% of sales and fixed costs will total...
AD Company estimates that variable costs will be 70% of sales and fixed costs will total $1,800,000. The selling price of the product is $10, and 700,000 units will be sold. Instructions: Using the mathematical equation (a) Compute the break-even point in units and dollars.               (b) Compute the margin of safety in dollars and as a ratio.         (c) Compute net income.                                                             
Glacial Company estimates that variable costs will be 63.2% of sales, and fixed costs will total...
Glacial Company estimates that variable costs will be 63.2% of sales, and fixed costs will total $655,000. The selling price of the product is $3.90. Compute the break-even point in (1) units and (2) dollars. a. Break even sales __ units b. Break even sales __ $$ Assuming actual sales are $2,115,000, compute the margin of safety in (1) dollars and (2) as a ratio. a. Margin of safety __ $$ b. Margin of safety ratio (as percentage)
dex company manufactures a single product assume the following data for 2016: Fixed costs in total:...
dex company manufactures a single product assume the following data for 2016: Fixed costs in total: Selling and administrative 54,000 Production 72,000 Variable costs per unit: Selling and administrative 3 Production 9 there were no units in inventory on january 1. during the year, 18,000 units were produced and 15,000 were sold. the selling price of dex company is 25 per unit. how much company’s net income for 2016 under the direct coating method?
Cost Accounting Ltd manufactures three products. The company allocates overhead costs as a rate per total...
Cost Accounting Ltd manufactures three products. The company allocates overhead costs as a rate per total direct labour hour. The following cost driver values have been identified: Machine hours / unit Production units Percentage of expert work Number of orders packed Labour hours Alpha 0.70 5 000 30% 4 1 200 Beta 0.30 3 500 20% 8 800 Gamma 0.50 8 000 50% 23 1 500 An analysis of the manufacturing overhead cost for the period shows the following: Activities...
A Company estimates that warranty costs will equal 2% of sales. In September, total sales equaled...
A Company estimates that warranty costs will equal 2% of sales. In September, total sales equaled $400,000 and warranty claims were $4,700. If the September ending balance in warranty payable was $7,200, what was the September beginning balance in warranty payable? A. $ 3,300        B. $ 3,900        C. $ 8,000 D. $10,500   E.  $10,800
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...
Completely and thoroughly explain how Total Product Costs would be calculated to determine the total cost...
Completely and thoroughly explain how Total Product Costs would be calculated to determine the total cost to make an electric coffee maker for a company that makes a variety of small home appliances. Include as much detail as possible and do not simply discuss the broad major cost categories of direct materials, direct labor, and manufacturing overhead.
Dantley's Furniture manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $230 per...
Dantley's Furniture manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $230 per table, consisting of 85% variable costs and 15% fixed costs. The company has surplus capacity available. It is Back​ Forrest's policy to add 55% markup to full costs. A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style.​ Dantley's Furniture Incorporated is invited to submit a bid to the hotel chain. What is the lowest...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT