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The concept used to solve this problem is fixed costs and variable costs.
Fixed Costs: It is the cost which does not change with increase or decrease in the production output level. It remains constant throughout the production. It is a part of total cost to run a business along with variable cost.
Variable Costs: It is a cost which changes with increase or decrease in production output level. It changes with company’s production volume. When production increases, the variable cost also increases and vice-versa
High-low method: High-low method is one of the methods used to separate variable and fixed component from semi-variable or semi-fixed cost. It can be termed as maximum-minimum method. This method involves use of highest and lowest level of activity and compares total cost at every level. It is possible to find the fixed and variable element by solving the equations.
This method uses only two figures (set). However, the set chosen might not be the typical ones. The set chosen usually does not show the exact picture of whole set of figure. The relation between sales revenue and costs might not show the exact relation due to presence of some uncommon events happening during that phase.
For example, one of the months chosen might consist of some onetime events like bonus paid which is not an indicator of whole year. This will not provide the best of results.
Using high method, variable and fixed cost from semi-variable cost is calculated as follows:
Direct materials: These are the materials which are used in the Production process which constitutes an integral portion of the final product, the cost of which is identifiable and traceable directly to it. The cost of direct material can be directly chargeable to the final product as compared to the indirect material.
Direct labor: Workers or employees directly involved in the manufacture of goods and services are called the direct labor. Direct labor can be directly traceable to a specific product or cost center. In other words the cost of the workers which is directly involved in the transformation of the raw material into the finished product is the direct labor.
(a)
Calculate total variable manufacturing cost per unit as follows:
(b)
Calculate the fixed cost as shown below.
Reformulate the above equation to find out the value of x which denotes the fixed cost
Ans: Part a
Total variable manufacturing cost per unit is $5.85
Part bThe fixed component is $739.5
The controller of Furgee Industries has collected the following monthly expense data for use in analyzing...
The controller of Norton Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs. Month Total Maintenance Costs Total Machine Hours January $2,550 300 February 2,850 350 March 3,450 500 April 4,350 690 May 3,050 500 June 5,460 700 Determine the variable cost components using the high-low method. (Round variable cost to 3 decimal places e.g. 12.250.) Variable cost per machine hour $ LINK TO TEXT LINK TO TEXT Determine the fixed...
The controller of Norton Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs. Exercise 18-3 The controller of Norton Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs Total Maintenance Costs Total Machine Hours Month $2,730 January 350 February 3,030 400 March 3,630 550 April 4,530 540 May 3,230 550 June 5,690 750 Detemine the variable cost components using the high-low method....
The controller of Norton Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs. Month Total Maintenance Costs Total Machine Hours January $2,550 300 February 2,850 350 March 3,450 500 April 4,350 690 May 3,050 500 June 5,460 700 Incorrect answer iconYour answer is incorrect. Determine the variable cost components using the high-low method. (Round variable cost to 3 decimal places e.g. 12.250.) Variable cost per machine hour $ 7.3 eTextbook and...
The controller of Norton Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs. Month Total Maintenance Costs Total Machine Hours January $2,590 330 February 2,890 380 March 3,490 530 April 4,390 660 May 3,090 530 June 5,530 730 Your answer is incorrect. Try again. Determine the variable cost components using the high-low method. (Round variable cost to 3 decimal places e.g. 12.250.) Variable cost per machine hour $ LINK TO TEXT...
The controller of Ayayai Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs. Month Total Maintenance Costs Total Machine Hours January $2,880 300 February 3,120 390 March 3,720 540 April 4,620 650 May 3,320 540 June 5,920 700 Determine the variable cost components using the high-low method. (Round variable cost to 2 decimal places e.g. 12.25.) Variable cost per machine hour $ LINK TO TEXT LINK TO TEXT Determine the fixed...
The controller of Hall Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs. Month Total Maintenance Costs Total Machine Hours January $ 3,041 4,032 February 3,456 4,608 March 4,147 6,912 April 5,184 9,101 May 3,686 5,760 June 5,322 9,216 Determine the variable-cost components using the high-low method. (Round variable cost to 2 decimal places e.g. 12.25.) Variable cost per machine hour $ LINK TO TEXT LINK TO TEXT Determine the fixed...
The controller of Hall Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs. Month Total Maintenance Costs Total Machine Hours January $3,041 4,032 February 3,456 4,608 March 4,147 6,912 April 5,184 9,101 May 3,686 5,760 June 5,322 9,216 Determine the variable-cost components using the high-low method. (Round variable cost to 2 decimal places e.g. 12.25.) Variable cost per machine hour $ eTextbook and Media Determine the fixed cost components...
The controller of Hall Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs. Month Total Maintenance Costs Total Machine Hours January $3,102 4,112 February 3,525 4,700 March 4,230 7,050 April 5,287 9,282 May 3,760 5,875 June 5,428 9,400 Your answer is correct. Determine the variable-cost components using the high-low method. (Round variable cost to 2 decimal places e.g. 12.25.) Variable cost per machine hour $ LINK TO TEXT LINK TO TEXT...
Exercise 18-3 The controller of Norton Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs Total Machine Hours Month January February March Total Maintenance Costs $2,860 3,160 3,760 4,660 3,360 5,620 300 350 500 April 690 May 500 June 700 Determine the variable cost components using the high-low method. (Round variable cost to 3 decimal places e.g. 12.250.) Variable cost per machine hours Determine the fixed cost components using the high-low...
Exercise 19-3 The controller of Norton Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs. Total Maintenance Total Month Costs Machine Hours January $2,760 330 February 3,060 380 March 3,660 530 April 4,560 660 May 3,260 530 June 5,700 730 Determine the variable cost components using the high-low method. (Round variable cost to 3 decimal places e.g. 12.250.) Variable cost per machine hour LINK TO TEXT LINK TO TEXT VIDEO: APPLIED...