Required: Using the high-low method: 1. Calculate the fixed cost of overhead. $
ID: 2419810 • Letter: R
Question
Required:
Using the high-low method:
1. Calculate the fixed cost of overhead.
$
2. Calculate the variable rate per labor hour.
$
3. Construct the cost formula for total overhead cost.
4. The company is estimating that in September the labor hours will be 600. How much should they estimate to have in total overhead cost for September?
$
Below are the overhead costs and labor hours for Smith & Co.
Required:
Using the high-low method:
1. Calculate the fixed cost of overhead.
$
2. Calculate the variable rate per labor hour.
$
3. Construct the cost formula for total overhead cost.
Total cost = Fixed cost + Variable cost = $ + ($ per hour X labor hours)4. The company is estimating that in September the labor hours will be 600. How much should they estimate to have in total overhead cost for September?
$
Explanation / Answer
High Low method
Variable cost per labor hour = (High overhead cost - Low overhead cost)/ Highest labor hour - lowest labor hour
= ( $ 13000 - $ 6600) / (700 - 300)
= $ 16 per hour
Variable cost at 700 hour = 700 hours * $ 16 per hour
= $ 11200
Total cost at 700 hour = $ 13000
Fixed Cost = $ 13000 - $ 11200
= $ 1800
Total Cost = Fixed Cost + Variable cost
= $ 1800 + 11200
= $ 13000
4) labor hours for september 600
Total cost = Fixed cost + variable cost
= $ 1800 + 600 hours * $16
= $ 11400
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