Solution:
1)Maintenance cost at 69,000 hours can be isolated as follows
39,000 MH's | 69,000 MH's | |
Toatl factory overhead cost | 158,210 | 232,910 |
Less: | ||
Utilites cost($1.4 per machine hour) | 54,600 | 96,600 |
Supervisior salaries | 45,000 | 45,000 |
Maintenance cost | 58,610 | 91,310 |
Utilities cost per machine hour = 54,600 / 39,000 = $1.4 per machine hour
2)
Machine hours | Maintenance cost | |
High level of activity | 69,000 | 91,310 |
Low level of activity | 39,000 | 58,610 |
variable rate = change in cost / chnage in activity
= (91,310 - 58,610)/(69,000 - 39,000)
=1.09 per machine hour
Total fixed cost | |
Total maintenance cost | 91,310 |
Less: Variable cost element | |
(69,000 * 1.09) | 75,210 |
Fixed cost element | 16,100 |
Therefore equation is Y = $16,100+$1.09X
3)
variable rate per machine hour | Fixed cost | |
Utilities cost | 1.4 | |
Supervisiors salaries | 45,000 | |
Maintenance cost | 1.09 | 16,100 |
Toatl overhead cost | 2.49 | 61,100 |
Hence equation is Y = 61,100+2.49X
4)At an activity level of 44,000 Mhr we have
Total overhead cost = 61,100+2.49*44,000 =170.660
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