Question

Please provide answers for 4 requirements in the box.

Pur Source produces agricultural irrigation equipment. During a year, the amount of overhead costs on a per month basis varies in relation to the machine hours used in a given year. The low for the past year was 4,230 hours, and the expense associated was $88,880. The high for the period was 9,300 hours, and the associated expense was $147,467. During the low month, the $88,880 in overhead costs consisted of indirect materials of $42,300 (a variable expense), rent of $34,000 (a fixed expense), and maintenance costs of $12,580 (a mixed expense). Requirements Requirement 1a. Given the breakdown of expenses in the low period, what dollar.) the estimated costs for indirect materials during the high period? (Round to the nearest whole The estimated costs for indirect materials are $ 93000 Requirement 1b. Given the breakdown of expenses in the low period, what are the estimated costs for rent during the high period? (Round to the nearest whole dollar.) The estimated costs for rent are $ 74752 Requirements 1. Given the breakdown of expenses in the low period, what are the estimated costs for (a) indirect materials, (b) rent, and (c) maintenance during the high period? 2. What is the cost function for maintenance costs? 3. What amount of maintenance costs would be expected with 7,800 machine hours of work? 4. What would be the total overhead costs at 7,800 machine hours? Print Done

Answer 1

1b. The estimated costs for rent are $34000.

Rent being a fixed expense, will remain constant at during the low and high periods.

1c. The estimated costs for maintenance are $20467.

$147467 - $93000 - $34000 = $20467

2. The cost function for maintenance costs is y = $1.56x + $5981

OR

The cost function for maintenance costs is y = $1.56x + $5959

Note: There is a difference in the fixed cost at the high level and at the low level due to the rounding off. Kindly use the appropriate cost. For clarifications write under comments section.

	Cost	Machine hours
High	20467	9300
Low	12580	4230
Change	7887	5070

Variable cost per machine hour = $7887/5070 = $1.56

Fixed cost (at low level) = $12580 - (4230 x $1.56) = $5981

Fixed cost (at high level) = $20467 - (9300 x $1.56) = $5959

3. The estimated costs for maintenance are $18149

y = ($1.56 x 7800) + $5981 = $18149

4. Total overhead costs are $130149

Indirect materials ($42300 x 7800/4230)	78000
Rent	34000
Maintenance	18149
Total	130149