Homework Answers
| Direct factory overhead | Labor hours | |
| High level of activity ( November ) | 108694 | 5720 |
| (-) Low level of activity ( September ) | 83802 | 3760 |
| Difference | 24892 | 1960 |
| a. | |
| Variable factory overhead cost per direct labor hour = Difference in Direct factory overhead / Difference in labor hours = 24892 / 1960 | 12.7 |
| b. | |
| Now let us calculate total fixed overhead cost using the data of high level of activity | |
| Total direct factory overhead = ( Labor hours * Variable factory overhead cost per direct labor hour ) + Total fixed overhead cost | |
| 108694 = ( 5720 * 12.7 ) + Total fixed overhead cost | |
| 108694 = 72644 + Total fixed overhead cost | |
| Total fixed overhead cost = 108694 - 72644 | 36050 |
| c. |
| Cost function : |
| y = 36050 + 12.7x |
| d. | |
| Let us calculate total factory overhead cost at the level of 8000 hours using the cost function. | |
| y = 36050 + 12.7*(8000) | 137650 |
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