Demo-case-5

# Demo-case-5 - overhead be ======================...

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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
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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....
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