A manufacturing company is analyzing the costs of its production. The cost data

Question

A manufacturing company is analyzing the costs of its production. The cost data and activity level for the past 15 month are given below: Additionally, the following total costs for the past 15 months are provided If total costs of completing production runs are expected to increase by 10% and the total fixed costs are expected to increase by 6%. For next month, what is the cost per unit for (i) machine hours (ii) production run Use the high-low method to estimate next month's production overhead costs, assuming the company is planning to run 2600 machine hours. Use the high-low method to estimate next month's production overhead costs, assuming the company is planning to complete 380 runs. Prepare a scattergraph showing the production overhead costs plotted against production in units machine hours. Prepare a scattergraph showing the production overhead costs plotted against the monthly production runs.

Explanation / Answer

NET COST 540000+225000*1.1+1650000*1.06=$2536500......

Total NO. of Machine hours =45048..

Total No of production runs=10284..

so cost per unit hour=2536500/45048=$56.3/Hours

cost per unit production run=23536500/10284=$2288.65

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