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Homework Answers
| Level of Activity | ||||
| Low | High | |||
| Direct labor hours | 56700 | 75600 | ||
| Total factory overhead costs | $292,770 | $332,460 | ||
| Activity | 56700 | Hours | ||
| Indirect material(variable) | $85,050 | |||
| Rent(fixed) | $140,000 | |||
| Maintenance(mixed) | $67,720 | |||
| Total factory overhead costs | $292,770 | |||
| 1 | Total cost at 75,600 direct labor hours | |||
| Rent (Fixed) | $140,000 | |||
| Indirect material(variable) | $113,400 | (85,050/56700*75600) | ||
| Total | $253,400 | |||
| Total cost at 75600 labor hours | $332,460 | |||
| Hence, Maintenance cost | $79,060 | (332460-253400) | ||
| Direct labor Hours | Maintenance cost | |||
| 2 | High level of activity | 75600 | $79,060 | |
| Low level of activity | 56700 | $67,720 | ||
| Change | 18900 | $11,340 | ||
| Variable cost element | $0.60 | Per DLH | (11,340/18900) | |
| Fixed Cost element | $33,700 | ($79,060 - 75,600*0.60) | ||
| Y = | 33,700 | + | 0.60 x | |
| 3 | Y = 33,700 + 0.60x | |||
| Y = 33,700 + 0.60*62,370 | ||||
| Y = 33,700+37,422 | ||||
| Y = $71,122 | ||||
| Hence, total cost at 62,370 direct labor hours = $ 71,122. | ||||
*if you have any doubt feel free to ask in the comment section. Please give your valuable feedback.
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