1. ABC Company manufactures electric saws. Based on past experience, ABC has fou

Question

1. ABC Company manufactures electric saws. Based on past experience, ABC has found that its total overhead
cost can be represented by the following formula: Total overhead cost = $50,000 + $2.00x, where x = number of
machine hours. Last year ABC incurred 100,000 machine hours.

Required:
A. What was the total overhead cost incurred by ABC last year?
B. What was the total variable overhead cost incurred by ABC last year?
C. What was the total overhead cost per machine hour last year?
D. What was the fixed overhead cost per machine hour last year?
E. If ABC incurs 120,000

Explanation / Answer

1.A.Total overhead cost = Fixed overhead cost + variable overhead cost

                                    = $ 50,000 + ($ 2 x 100,000)

                                    = $ 50,000 + $ 200,000

                                    = $ 250,000

B. Variable overhead cost = $ 2 x 100,000 = $ 200,000

C. Total overhead cost per machine hour = $ 250,000/100,000 = $ 2.5

D. Fixed overhead cost per machine hour = $ 50,000/100,000 = $ 0.5

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