Demo-case-5 - overhead be ====================== Demonstration Case 2(Continued from Demonstration case 1 The cost analyst John went back to the

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Demonstration Case 1 John, a cost analyst for a manufacturing firm, was asked to estimate the overhead costs at one of the factories. He interviewed the supervisor and several workers there to get a feel of how overhead costs changed. His experience with the cost accounting system pointed to the use of machine hours as the cost driver. Over the last 12 months, the total overhead costs were $103,918, out of which John determined $4,620 to be fixed cost per month and the rest variable cost. For the same period of time, 4,519 machine hours were incurred in that factory. Required: 1. Please help John determine the general cost equation that describes the relation between overhead costs and machine hours in that factory. 2. If the factory expects to spend 400 machine hours next month, how much will the
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: overhead be? ====================== Demonstration Case 2 (Continued from Demonstration case 1) The cost analyst, John, went back to the accounting information system to look for more relevant data. The following breakdown of the overhead costs and the associated machine hours over the same 12-month period was available: Month Overhead Machine hours 1 $7,102 203 2 8,620 319 3 9,120 425 4 7,092 289 5 7,965 388 6 9,641 471 7 10,421 512 8 8,834 443 9 6,935 262 10 8,520 371 11 10,342 494 12 9,326 342 Total $103,918 4,519 Required: 1. Plot the data using scattergraph. 2. Use the high-low method to estimate the cost function. 3. Predict overhead costs when 400 machine hours are expected to be spent for the coming month....
View Full Document

This note was uploaded on 10/29/2009 for the course ACC 066 taught by Professor Kwak during the Spring '08 term at DeAnza College.

Ask a homework question - tutors are online