Machine Hours MFG Overhead Cost February 6,900 $6,250 March 5,000 $5,375 April 6

Question

Machine Hours MFG Overhead Cost

February 6,900 $6,250
March 5,000 $5,375
April 6,300 $ 6,025
May 9,333 $ 7,975
June 6,833 $6,050


(a) Using the high-low method, compute the following:

(1) The variable element of overhead cost per machine-hour:
$____________________ per machine-hour

(2) The fixed element of monthly overhead cost: $__________________

(b) Use the cost relationship determined in part a to estimate the total manufacturing overhead costs for July 2010, given that 7,250 machine-hours are scheduled. $___________________

Explanation / Answer

(7975-5375)/(9333-5000)= .60 5375- .60*5000= 2375 Y= .60 x +2375 Y= .60*7250 +2375=6,725

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