1. BTC uses the cost formula Y = $5,300 + $0.60X to estimate its maintenance cos
ID: 2332088 • Letter: 1
Question
1. BTC uses the cost formula Y = $5,300 + $0.60X to estimate its maintenance costs where X represents machine hours. If the August budget calls for 8,000 hours of planned machine time, what maintenance cost is expected to be incurred during August?
2. MCK bases its predetermined overhead rate on the estimated machine hours for the upcoming year. Its estimates for the upcoming appear below:
Machine hours 52,800
Variable manufacturing overhead $4.10 per machine hour
Fixed manufacturing overhead $425,000
What is MCK's predetermined overhead rate based on these estimates?
Explanation / Answer
Q. 1)
In this case X should be replaced by 8,000 hours and then the equation should be solved to get the answer.
Y = 5,300 + 0.60 × 8,000
= 5,300 + 4,800
= 10,100
Answer: The required cost is $10,100.
Q. 2)
Fixed overhead should be in per-hour, and then this should be added to variable rate to get the required rate.
Required rate = (Fixed overhead / Hours) + Variable overhead per hour
= ($425,000 / 52,800) + $4.10
= 8.05 + 4.10
= 12.15 per machine hour (Answer)
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