The Rams Company has provided the following information. Month July Factory Over
ID: 2453468 • Letter: T
Question
The Rams Company has provided the following information. Month July Factory Overhead 92,095 Labor hours 4,900 Month August Factory Overhead 105,056 Labor hours 5,480 Month September Factory Overhead 83,802 Labor hours3,760 Month Octuber Factory Overhead 99,594 Labor hours 4,420 Month November Factory Overhead 108,694 Labor hours 5,720 Month december Factory Overhead 97,404 Labor hours 3,980. A. Using the high-low method calculate the total fixed Factory overhead cost and the variable cost per direct labor hour. B. Prepare the cost functon. C. What would the total Factory overhead cost be at a level of 8,000 hours?
Explanation / Answer
Answer:A. Using the high-low method :
Calculation of the variable cost per ditect labor hours=($108694-$83802)/(5720-3760)
=$24892/1960
=$12.7 per direct labor hours
Calculation of the fixed costs:
Fixed costs=Total cost-Variable cost
=$108694-($12.7*5720)
=36050
Answer:B Cost function=12.7X+$36050
Answer:C
Total factory overhead=12.7*8000+36050
=137650
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