Demo-case-5-solution

Demo-case-5-solution - lowest activity was 203 machine...

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Demo Case 1-Solution: 1. The variable cost component for the last 12 months had a total of $48,478 = $103,918 - $4,620 × 12, which can be divided by the machine hours involved to get the variable overhead per unit of machine hour. That is, V = $48,478 ÷ 4,519 machine hours = $10.73 per machine hour. The cost equation can be stated as Overhead costs = $4,620 per month + $10.73 × Number of machine hours spent. 2. For 400 machine hours to be spent next month, the overhead costs are expected to be $4,620 per month + $10.73 × 400 machine hours = $8,912. Demo Case 2-Solution: 1. 0 2000 4000 6000 8000 10000 12000 0 100 200 300 400 500 600 Machine hours Overhead 2. The highest activity was 512 machine hours (MH) with overhead costs of $10,421; the
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Unformatted text preview: lowest activity was 203 machine hours (MH) with overhead costs of $7,102. Variable cost per machine hour = $10,421 - $7,102 512 MH - 203 MH = $10.74 per machine hour. Fixed cost = $10,421 - $10.74 × 512 machine hours = $4,922. (Alternatively, Fixed cost = $7,102 - $10.74 × 203 machine hours = $4,922.) The cost equation will be Overhead costs = $4,922 per month + $10.74 × Number of machine hours used. 3. For 400 machine hours to be spent next month, the overhead costs are expected to be $4,922 per month + $10.74 × 400 machine hours = $9,218....
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