The following information is available regarding the total manufacturing overhea
ID: 2580101 • Letter: T
Question
The following information is available regarding the total manufacturing overhead of Bursa Mfg. Co. for a recent four-month period.
a-1. Use the high-low method to determine the variable element of manufacturing overhead costs per machine-hour. (Round your answer to 2 decimal places.)
a-2. Use the high-low method to determine the fixed element of monthly overhead cost.
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.
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?
Machine-Hours Manufacturing Overhead January 5,700 $ 300,000 February 3,200 224,000 March 4,900 263,800 April 2,500 190,000
Explanation / Answer
a-1. Variable element of manufacturing overhead costs per machine-hour = (300,000-190,000) / (5,700-2,500)
= 34.375.
a-2. Fixed element of monthly overhead cost = 300,000 - (5,700*34.375)
= 104,062.5
b. May's manufacturing overhead costs = (5,300*34.375) + 104,062.5
= 286,250.
c. Total manufacturing overhead expected for the month of February = (3,200*34.375) + 104,062.5
= 214,062.5
Underestimated by 9,937.5 (224,000 - 214,062.5)
Total manufacturing overhead expected for the month of March = (4,900*34.375) + 104,062.5
= 272,500
Overestimated by 8,700 (272,500 - 263,800).
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.