Requirement A | |||||||
Machine Hours | Overhead Costs | ||||||
High | 1612 | 108580 | |||||
Low | 1294 | 96655 | |||||
Computation of variable Cost per hat : | |||||||
Variable OH per hour = Difference in Overhead Costs / Difference in Machine Hours | |||||||
108580-96655/1612-1294 | |||||||
$ 37.50 | Per hat | ||||||
Computation of Fixed Cost Per Month : | |||||||
Lets Take Total Overhead cost of 1612 Machine hours | |||||||
Total OH Cost = $108580 | |||||||
We know Total cost = Fixed cost + variable cost | |||||||
Since we know Variable OH per hour , Total variable OH here will be 1612*37.50 | $ 60,450.00 | ||||||
Difference of Total cost and variable cost = fixed cost = 108580-60450 | $ 48,130.00 | ||||||
Fixed portion of OH = $48130 | |||||||
Requirement B | |||||||
At 1600 Machine Hours,Total OH costs : | |||||||
Variable portion + Fixed portion | |||||||
1600*37.50+48130 | |||||||
$ 1,08,130.00 | |||||||
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