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Unformatted text preview: stimated costs of the Machining Department? Answer: a. Slope coefficient = (\$49,500 \$45,750) / (4,600 3,800) = \$4.6875 per machine-hour Constant = \$49,500 - (\$4.6875 × 4,600) = \$27,937.50 Estimating equation = \$27,937.50 + \$4.6875X b. June's estimated costs = \$27,937.50 + \$4.6875 × 4,200 = \$47,625 Diff: 2 Terms: high-low method, cost predictions Objective: 4 AACSB: Analytical skills 167) Tessmer year of operation and management is still unsure of the best way to estimate the overhead costs of operations for budgetary Manufact purposes. For the first six months of operations, the following data were collected: uring Company Machine -hours Kilowatt -hours Total Overhead Costs produces January 3,800 4,520,000 \$138,000 inventory February 3,650 4,340,000 136,800 in a March 3,900 4,500,000 139,200 highly April 3,300 4,290,000 136,800 automated May 3,250 4,200,000 126,000 assembly June 3,100 4,120,000 120,000 plant in Olathe, Required: Kansas. The a. Use the high-low method to determine the estimating cost function with machine -hours as the cost driver. automated b. Use the high-low method to determine the estimating cost function with kilowatt-hours as the cost driver. system is c. For July, the company ran the machines for 3,000 hours and used 4,000,000 kilowatt-hours of power. The overhead in its first costs totaled \$114,000. Which cost driver was the best predictor for July? Answer: a. Machinehours: Slope coefficient = (\$139,200 \$120,000) / (3,900 3,100) = \$24.00 per machine-hour Constant = \$139,200 - (\$24 × 3,900) = \$45,600 Machine-hour estimating equation = \$45,600 + \$24X b. Kilowatthours: Slope coefficient = (\$138,000 \$120,000) / (4,520,000 4,120,000) = \$0.045 per kilowatt-hour Constant = \$138,000 - (\$0.045 × 4,520,000) = \$65,400 Kilowatt-hour estimating equation = -\$65,400 + \$0.045KWH c. July's estimated costs: with machinehours = \$45,600 + \$24 × 3,000 = \$117,600 with kilowatthours = -\$65,400 + \$0.045 × 4,000,000 = \$114,600 The best estimator for July was the kilowatt- Diff: 3 Terms: high-low method, cost predictions Objective: 4 AACSB: Analytical skil...
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