Question

Question 14

XYZ Company uses the formula y = a + bX to predict and analyze overhead costs. In the previous year, XYZ used $1,750 per month for the a factor and $0.35 for the b factor in applying overhead. XYZ has used direct labour hours in the past, but is wondering whether overhead behaviour is more closely associated with machine hours. The following data have been generated for consideration:

Month		Machine Hours		Overhead Costs
1		414		$2,752
2		487		$2,968
3		394		$2,436
4		483		$2,824
5		510		$2,745
6		443		$2,693

a) Determine the fixed and variable values, using machine hours.

b)If it is expected that the company will incur 1,032 machine hours in the coming month, predict that month’s overhead costs.  

c)or April of the coming year, XYZ expects 3,300 direct labour hours and 604 machine hours. Predict overhead costs using

direct labour hours and machine hours

Answer 1

Ansever - Page No ③ XYZ Company uses the formula ya a+bX In previous gear, fixed corf - $1450 per month Variable cook= $0.35 per divect fabox hours XYZ used UN @fized costs and variable valences using machine bewys High level activity machine howis = 510 tigh level activitig = $ 2745 Low level activity machine how is = 394 .: low level activity = $2436 Variable coof - 2745 ~ 2436 610 S 510-394 = 309 = 9.66 116 1. variable corsf = $2.66 per machine hower -fixed cosf = 9446 - (510 X 2:66). 0445 - 135666 = 1388.4 a 1388 Ti fized cont = $ 1388)

Page No ③ 6 Month's verhead coat Company in cur machine hours 1032 Months overhead cosf = 1388 + (1032 x $2.66) = 1388 + 2745,12 = 4133.12 M 4133 1. Monthis overhead corf - $4133 © xyz especks 3300 direct, labower howns & 604 machine bowis using disect labour howers · Overhead conf = 1950 + (3300 X 0,35) = 1450 + 1155 2905 i overhead costs a $2905 waing machine beurs Overhead cook = 1388 + (6048$2.66) - $8994.64 $ 29995 Overhead cost -$2995