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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