The accounting records of Sunshine industrial Manufacturing contained the follow

Question

The accounting records of Sunshine industrial Manufacturing contained the following data: July's manufacturing overhead costs consisted of machine supplies ($170.000). property taxes ($29.500), and plant maintenance ($1,080,000). These costs are variable, fixed, and semi-variable. Respectively. Determine the machine supplies and property taxes for May(6 marks) Use the high-low method, analyze the plant maintenance cost and calculate the monthly fixed amount and the variable cost per machine hour. (6 marks) Assume the same cost behavior in the future and estimate the total amount of manufacturing overhead the company can expect in October if 56,000 machine hours are worked. (8 marks)

Explanation / Answer

Statement showing computations Particulars Amount 1) Machine Supplies are Variable Rate =170,000/68,000                         2.50 Machine Supplies for May = 46,000*2.5            115,000.00 Property Taxes are Fixed Thus Property Taxes for May are              29,500.00 2) Cost at highest level of activity        1,279,500.00 Cost at Lowest level of activity            889,000.00 Highest level of activity              68,000.00 Lowest Level of activity              46,000.00 Variable cost per unit = (1279500-889000)/(68000-46000) Variable cost per unit = 390,500/22,000 Variable cost per unit = 17.75 Fixed Costs = Total Costs - Variable costs Fixed Costs = 1279500 - 68000*17.75 Fixed Costs = 1279500 - 1207,000 Fixed Costs = 72,500 3) Costs for October 56000*17.75 + 72,500 994,000 + 72,500                                                               1,066,500.00

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