(TCO 3) The controller of Joy Co has requested a quick estimate of the manufactu
ID: 2565342 • Letter: #
Question
(TCO 3) The controller of Joy Co has requested a quick estimate of the manufacturing supplies needed for the Morton Plant for the month of July, when production is expected to be 470,000 units to meet the ending inventory requirements and sales of 475,000 units. Joy Co's budget analyst has the following actual data for the last three months.
Estimated factory overhead costs $1,500,000
Actual Factory overhead costs $1,776,400
Estimated labor hours 48,000
Actual labor hours 51,700
Estimated labor costs $756,000
Actual labor costs $840,125
Estimated machine hours 96,000
Actual machine hours 102,600
Using the high-low method to develop a cost estimating equation, the estimate of the needed manufacturing supplies for July would be:
$681,500.
$688,750.
$749,180.
$752,060.
Explanation / Answer
Variable Cost per unit = ($853,560 - 723,060)/(540,000 - 450,000) = $1.45 per unit;
Fixed Cost = $853,560 - $1.45(540,000) = $70,560;
Total Cost = $70,560 + $1.45(470,000) = $752,060
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