High low method/ activity based costing
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Utility costs at one of Hambley Corporation's factories are listed below:
Machine-Hours Utility Cost
February 4,221 $39,308
March 4,268 $39,573
April 4,234 $39,392
May 4,237 $39,394
June 4,299 $39,787
July 4,318 $39,881
August 4,305 $39,798
September 4,308 $39,831
October 4,226 $39,315
Management believes that utility cost is a mixed cost that depends on machine-hours.
Required:
Estimate the variable cost per machine-hour and the fixed cost per month using the high-low method.
2. Whitford Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products.
Activity Cost Pools Activity Rate
Setting up batches $30.11 Per batch
Assembling products $3.04 Per assembly hour
Processing customer orders $81.86 Per customer order
Product W52Q Product Q29D
Number of batches 74 26
Number of assembly hours 239 208
Number of customer orders 72 5
Required:
a. How much overhead cost would be assigned to Product W52Q using the company's activity-based costing system?
b. How much overhead cost would be assigned to Product Q29D using the company's activity-based costing system?
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Solution Summary
The solution the use of high low method to calculate the fixed and variable costs and overhead cost allocation using activity based costing
Solution Preview
1. In the high low method, we take the highest and the lowest values to calculate the variable and fixed cost. From the data given,
highest is 4,318 machine hours and 39,881 utility cost
lowest is 4,221 machine hours and 39,308 utility cost
The ...
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