Crosshill Company's total overhead costs at various levels of activity are presented below: Total Overhead Cost $204,400 $183,600 Month April May June July Machine-Hours 70,000 60,000 80,000 90,000 Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 60,000-machine-hour level of activity in May is as follows: Utilities (variable) Supervisory salaries (fixed) Maintenance (mixed) Total overhead cost $225,200 $246,000 Maintenance cost in July $ 52,200 21,000 110,400 $183,600 The company wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the $246,000 of overhead cost in July was maintenance cost. (Hint: To do this, first determine how much of the $246,000 consisted of utilities and supervisory salaries. Think about the behaviour of variable and fixed costs within the relevant range) (Round the "Variable cost per unit" to 2 decimal places.)
Crosshill Company's total overhead costs at various levels of activity are presented below: Total Overhead Cost $204,400 $183,600 Month April May June July Machine-Hours 70,000 60,000 80,000 90,000 Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 60,000-machine-hour level of activity in May is as follows: Utilities (variable) Supervisory salaries (fixed) Maintenance (mixed) Total overhead cost $225,200 $246,000 Maintenance cost in July $ 52,200 21,000 110,400 $183,600 The company wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the $246,000 of overhead cost in July was maintenance cost. (Hint: To do this, first determine how much of the $246,000 consisted of utilities and supervisory salaries. Think about the behaviour of variable and fixed costs within the relevant range) (Round the "Variable cost per unit" to 2 decimal places.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:Crosshill Company's total overhead costs at various levels of activity are presented below:
Total Overhead
Cost
$204,400
Month
April
May
June
July
Machine-Hours
70,000
60,000
80,000
90,000
Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the
60,000-machine-hour level of activity in May is as follows:
Utilities (variable))
Supervisory salaries (fixed)
Maintenance (mixed)
Total overhead cost
$183,600
$225,200
$246,000
$ 52,200
21,000
110,400
$183,600
The company wants to break down the maintenance cost into its variable and fixed cost elements.
Maintenance cost in July
Required:
1. Estimate how much of the $246,000 of overhead cost in July was maintenance cost. (Hint: To do this, first determine how much of
the $246,000 consisted of utilities and supervisory salaries. Think about the behaviour of variable and fixed costs within the relevant
range.) (Round the "Variable cost per unit" to 2 decimal places.)
Transcribed Image Text:2. Using the high-low method, estimate a cost formula for maintenance. (Round the "Variable cost per unit" to 2 decimal places.)
High activity level
Low activity level
Change
Variable cost element
Fixed cost element
Machine-Hours
Maintenance Cost
Utilities cost
Supervisory salaries cost
Maintenance cost
Total overhead cost
per MH
3. Express the company's total overhead cost in the form Y=a+bX. (Round the "Variable cost per unit" to 2 decimal places.)
Variable Cost per
Machine-Hour
Fixed Cost
4. What total overhead cost would you expect to be incurred at an activity level of 75,000 machine-hours? (Round the "Variable cost
per unit" to 2 decimal places.)
Total overhead cost
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