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    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.


    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


    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 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 ...

    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