wants to determine the cost behavior for overhead. Based on the following accoun

Question

wants to determine the cost behavior for overhead. Based on the following accouns The Flamilton Malls Company cost accontant weribh owiang acounts havebeen Uailties, and uroh is observation and discussion with the plant workers, Supervisor salaries and depreciation are believed to be generally ii generally believed to be variable; Indirect labor primarily caused by the electricity to run ma accounts and thtn machineryady is responsible for moving materials; Utility cost is primarily balances are given belowhigcs are driven by the number of purchase orders Depreciation Supervisory on Plant and Indirect Labor Utilities Purchasing Salaries Equipment anua February 0$40,000 $ 31,600 2120070,800 Copyright Cengage Leaming Powered by Cognero Page 11 March 25 64 April Ma June 41,400 34 13 Information on the activities is given below: chine purchase # of moves orders 250 300 450 380 340 200 hours January February arch ril 340 380 400 500 480 420 5,800 June Total 32o Required: 1. Why did the cost accountant decide that salaries and depreciation were fixed? 2. Calculate the average the three drivers. 3. Calculate the fixed overhead and variable rates for each of the costs. Write an equation for the total 4. In January, 490 moves; 4,375 machine hours, and 220 purchase orders were expected. What is the predicted? account balance for each of the 5 accounts and calculate the average monthly amount for each of overhead cost.

Explanation / Answer

1. Fixed Cost are those which changes with the increase or decrease in the Amount of Production. However There are some cost which remains constant and those are not considered as variable.

Both Salaries and Depreciation are fixed as they will be incurred even if there is no production.

2.

3)

So the Equation is

$48,400+$13000+82.98*No of Moves+4.25*No of Machine Hours+240.63*No of Purchase orders.

4.

Average Account Balance Indirect Labor Utilities Purchasing Supervisor Salaries Depreciation on plant and Equipment January $      28,500.00 $        24,000.00 $          76,400.00 $                 40,000.00 $                                                        13,000.00 February $      31,600.00 $        21,200.00 $          70,800.00 $                 46,000.00 $                                                        13,000.00 March $      33,600.00 $        25,000.00 $          75,200.00 $                 64,000.00 $                                                        13,000.00 April $      41,400.00 $        25,000.00 $          80,400.00 $                 55,600.00 $                                                        13,000.00 May $      40,000.00 $        25,000.00 $          79,800.00 $                 50,800.00 $                                                        13,000.00 June $      34,000.00 $        25,000.00 $          79,400.00 $                 34,000.00 $                                                        13,000.00 Total $   209,100.00 $      145,200.00 $        462,000.00 $              290,400.00 $                                                        78,000.00 No of Months 6 6 6 6 6 Average $      34,850.00 $        24,200.00 $          77,000.00 $                 48,400.00 $                                                        13,000.00

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