QUESTION 21 Below are the overhead costs and labor hours for Smith & Co Month Ov

Question

QUESTION 21 Below are the overhead costs and labor hours for Smith & Co Month Overhead Cost # of labor hours 9,640 12,680 11,08 11.720 13,000 10,120 8,84 6,6 490 680 580 620 700 520 440 300 anuary February March ril May une ul August 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?

Explanation / Answer

1) Fixed cost = 13000-(700*16) =1800

2) Variable cost per labour hour = (13000-6600)/(700-300) = 16 per labour hour

3) Cost formula

Y = a+bx

Y = 1800+16X

4) Total overhead cost = (600*16+1800) = 11400

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