The following information is available regarding the total manufacturing overhea
ID: 2373845 • Letter: T
Question
The following information is available regarding the total manufacturing overhead of Bursa Mfg. Co. for a recent four-month period:
Use the high-low method to determine the variable element of manufacturing overhead costs per machine-hour.
Use the high-low method to determine the fixed element of monthly overhead cost.
Bursa expects machine-hours in May to equal 5,300. Use the cost relationships determined in part a to forecast May's manufacturing overhead costs.
Suppose Bursa had used the cost relationships determined in part a to estimate the total manufacturing overhead expected for the months of February and March. By what amounts would Bursa have over- or underestimated these costs?
The following information is available regarding the total manufacturing overhead of Bursa Mfg. Co. for a recent four-month period:
Explanation / Answer
a-1
Use the high-low method to determine the variable element of manufacturing overhead costs per machine-hour.
Manufacturing overhead cost
$50
per machine hour
a-2
Use the high-low method to determine the fixed element of monthly overhead cost.
Fixed element of manufacturing overhead
$40,000
b.
Bursa expects machine-hours in May to equal 5,300. Use the cost relationships determined in part a to forecast May's manufacturing overhead costs.
Estimated manufacturing overhead
$305000
c.
Suppose Bursa had used the cost relationships determined in part a to estimate the total manufacturing overhead expected for the months of February and March. By what amounts would Bursa have over- or underestimated these costs?
Amount over (under) estimated
February $(24000)
March
$21200
a-1
Use the high-low method to determine the variable element of manufacturing overhead costs per machine-hour.
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