9. Armour Automotive Company has accumulated the following data over a six-month

Question

9. Armour Automotive Company has accumulated the following data over a six-month period: Indirect Labor Indirect Hours 300 400 500 600 700 800 $5,300 January February March April May $6,700 $7,800 $8,900 $9,800 $10,600 June Separa te the indirect labor into its fixed and variable components, using the high-low method Hours Cost High Volume Low Volume Change Variable cost per indirect labor hour: $ 40. LDV Co. had a year-end remaining debit balance of $17,000 in its under- and overapplied fac averhead account The balance was considered to be large and, therefore, should be closed

Explanation / Answer

Variable cost per indirect labor hour = $5300/500 = $10.60  

Hours Cost High volume 800 $ 10,600 Low volume 300 $    5,300 Change 500 $    5,300

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