Question 3 High-Low Method; Predicting Cost Colby Limited is a manufacturing company whose total factory overhead costs fluctuate somewhat from year to year, according to the number of machine-hours worked in its production facility. These costs at high and low levels of activity over recent years are given below: Level of Activity Machine-hours 50,000 Total factory overhead costs $ 14,250,000 $ Indirect materials (variable) $ Rent (fixed) Low Maintenance (mixed) Total factory overhead costs $ The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 50,000 machine-hours level of activity as follows: High 5,000,000 6,000,000 3,250,000 14,250,000 75,000 17,625,000 For planning purposes, the company wants to break down the maintenance cost into its variable and fixed cost elements.

Question 3 High-Low Method; Predicting Cost Colby Limited is a manufacturing company whose total factory overhead costs fluctuate somewhat from year to year, according to the number of machine-hours worked in its production facility. These costs at high and low levels of activity over recent years are given below: Level of Activity Machine-hours 50,000 Total factory overhead costs $ 14,250,000 $ Indirect materials (variable) $ Rent (fixed) Low Maintenance (mixed) Total factory overhead costs $ The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 50,000 machine-hours level of activity as follows: High 5,000,000 6,000,000 3,250,000 14,250,000 75,000 17,625,000 For planning purposes, the company wants to break down the maintenance cost into its variable and fixed cost elements.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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High-Low Method The manufacturing costs of Rosenthal Industries for the first three months of the year follow: Total Costs Production January $75,240 855 units February 86,530 1,700 March 117,040 2,755 Using the high-low method, determine (a) the variable cost per unit and (b) the total fixed cost. a. Variable cost per unit $fill in the blank 1 b. Total fixed cost $fill in the blank 2
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