17. (TCO 9) At the high level of activity in November, 7,000 machine hours were
ID: 2592233 • Letter: 1
Question
17. (TCO 9) At the high level of activity in November, 7,000 machine hours were run and power costs were $12,000. In April, a month of low activity, 2,000 machine hours were run and power costs amounterd to $6,000. Using the high-low method, what is the estimated fixed cost element of power costs? (Points: 5) $12,000 $6,000 53,600 S8,400 18. (TCO 10) Which of the following statements regarding budget reports is incorreet? (Points : 5) The cost of budget reports should not outweigh the benefits. Budget reports are used for planning, control, and information. Reports prepared for upper management typically have fewer details than reports prepared for lower-level managers Reports are prepared more frequently for upper management than for lower-level managers. 17. (TCO 9) At the high level of activity in November, 7,000 machine hours were run and power costs were $12,000. In April, a month of low activity, 2,000 machine hours were run and power costs amounted to S6,000. Using the high-low method, what is the estimated fixed cost element of power costs? (Points: 5) $12,000 S6,000 $3,600 $8,400 18. (TCO 10) Which of the following statements regarding budget reports is incorrer? (Points: 5) The cost of budget reports should not outweigh the benefits. Budget reports are used for planning, control, and information Reports prepared for upper management typically have fewer details than reports prepared for lower-level managers Reports are prepared more frequently for upper management than for lower-level managers.Explanation / Answer
Answer 17:first we will calculate the variable cost using the high low activity formula
VC per unit = highest power cost - lowets power cost/(highest machine hours - lowest machine hours)
VC per unit = (12000- 6000)/(7000-2000) = $1.2 / mac hr
Fixed cost = total cost - total varibale cost
Fixed cost = 12000- 7000*1.2
estimated Fixed cost = $3600
Option 3 is the answer
Answer 18: option 3 is incorrect.
Reports prepared for upper management has more details in comparison to prepared for lower level. as upper management need more data points for the decision making
Answer 15: option 3
Fixed overhead costs are more suitable for the static budget.
Answer 16: Option D is the answer.
Variable cost is calculated as follows Variable cost per unit * activity
if activity increases 10% variable cost will also increase 10%
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