Question

Please show all steps so I can fully understand how to solve. thank you

You are given the following data for Skylar Ltd. Direct Labour Hours January 25700 February 32600 March 45090 April 37500 May 40400 June 21052 July 23700 August 39200 September October 24000 November 25200 December Overhead Costs $630800 $700100 $884664 $720500 $910300 $629960 $651000 $759000 $751513 $615200 $620100 $654269 41004 Using the high-low method, estimate the total overhead at a volume of 30,000 direct labour hours: Select one a: 5684474 b. $724772 c5654269 d: 5317877

Answer 1

b.724,772.

working:

variable cost portion using high low method :

(cost at high labor hours - cost at low labour hours) / (high labor hours - low labor hours)

=> (884,664- 629,960) / (45,090 - 21,052)

=>10.5958898 per direct labour hour.

fixed portion:

consider low labor costs:

total labor cost = fixed portion + [variable portion* direct labor hours]

=>629,960 = fixed portion + [10.5958898*21052]

=>fixed portion = 629,960 - 223,064.672

=>$406,895.33

now,

at 30,000 direct labor hours,

the total cost = 406,895.33 + [10.5958898*30,000]

=>724,772.