The following information is available regarding the total manufacturing overhea
ID: 2576695 • Letter: T
Question
The following information is available regarding the total manufacturing overhead of Bursa Mfg. Co. for a recent four-month period.
a-1. Use the high-low method to determine the variable element of manufacturing overhead costs per machine-hour. (Round your answer to 2 decimal places.)
a-2. Use the high-low method to determine the fixed element of monthly overhead cost.
b. Bursa expects machine-hours in May to equal 5,300. Use the cost relationships determined in part a to forecast May's manufacturing overhead costs.
c. Suppose Bursa had used the cost relationships determined in part a to estimate the total manufacturing overhead expected for the months of February and March. By what amounts would Bursa have over- or underestimated these costs?
Machine-Hours Manufacturing Overhead January 6,000 $ 300,000 February 3,200 224,000 March 4,900 263,800 April 2,900 180,000
Explanation / Answer
A. 1.
Variable element of manufacturing overhead costs per machine -hour=$120,000/3100
=$38.71 per machine-hour.
A.2.
Total manufacturing overhead at 6000 machine -hour level=$300,000
Variable element of manufacturing overhead at machine -hour level(6000×$38.71)=$232,260
Fixed element of manufacturing overhead=$67,740
B.
Estimated manufacturing overhead at activity level of 5300 machine hours:
Fixed element=$67,740
Variable cost element (5300×$38.71)=$205,163
Total estimated manufacturing overhead=$272,903
C.
Machine hours manufacturing overhead High point 6000 300,000 Low point 2900 180,000 Changes 3100 $120,000Related Questions
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