The following information is available regarding the total manufacturing overhea
ID: 2377565 • Letter: T
Question
The following information is available regarding the total manufacturing overhead of Bursa Mfg. Co. for a recent four-month period:
Jan Machine hours: 5600 Manufacturing overhead: $300,000
Feb Machine hours: 3200 Manufacturing overhead: $224,000
Mar Machine hours: 4900 Manufacturing overhead: $263,800
Apr Machine hours: 2900 Manufacturing overhead: $190,000
a-1 Use the high-low method to determine the variable element of manufacturing overhead costs per machine-hour.
Manufacturing overhead coast $______ per machine hour
a-2 Use the high-low method to determine the fixed element of monthly overhead cost.
Fixed element of manufacturing overhead $________
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 $_______
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 $______
March $_______
Explanation / Answer
a-1 Use the high-low method to determine the variable element of manufacturing overhead costs per machine-hour.
Manufacturing overhead coast $40.74per machine hour
a-2 Use the high-low method to determine the fixed element of monthly overhead cost.
Fixed element of manufacturing overhead $71,856
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 $287,778
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 $(21776)
March $7682
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