Question

Sawaya Co., ltd., of japan is a manufacuring company whose total factory overhead costs fluctuate

value: 2.50 points Sawaya Co., Ltd., of Japan is a manufacturing company whose total factory overhead costs fluctuate considerably from year to year according to increases and decreases in the number of direct labor-hours worked in the factory. Total factory overhead costs at high and low levels of activity for recent years are given below: Level of Activity Low High 63,600 84,800 $ 300,620 $347,260 Direct labor-hours Total factory overhead costs The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 63,600-hour level of activity as follows: Indirect materials (variable) Rent (fixed) Maintenance (mixed) $ 114,480 126,000 60,140 Total factory overhead costs $ 300,620 To have data available for planning, the company wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the $347,260 factory overhead cost at the high level of activity consists of maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $347,260 consists of indirect materials and rent. Think about the behavior of variable and fixed costs!) (Do not round Intermediate calculations.) Maintenance cost at high level of activity $ 68,620

Answer 1

Answers Maintenance Cost at High level 68620 Estimate the costs with High-Low Method Direct Labor Maintenance Hours Cost High level of Activity 84800 68620 low level of Activity 63600 601401 Change 21200 8480 Varaible cost Element (8480/21200) 0.40 Per DLH Fixed Cost Element (68620-(84800*0.40) 34700 Per month Cost Equation = Y= $34,700+$0.40 X Total Factory overhead cost at 69,960 Direct Labor Hours 125928 126000 Variable Cost (1.80*69960) Fixed cost Maintenance Cost = (34700+(69690*0.40) Total Facotry overhead cost 62684 314612