Explore BrainMass

Explore BrainMass

    Accounting:High-low analysis.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Tessmer Manufacturing Company produces inventory in a highly automated assembly plant in Olathe, Kansas. The automated system is in its first year of operation and management is still unsure of the best way to estimate the overhead costs of operations for budgetary purposes. For the first six months of operations, the following data were collected:

    Machine-hours Kilowatt-hours Total Overhead Costs
    January 3,800 4,520,000 $138,000
    February 3,650 4,340,000 136,800
    March 3,900 4,500,000 139,200
    April 3,300 4,290,000 136,800
    May 3,250 4,200,000 126,000
    June 3,100 4,120,000 120,000

    Question 1: Use the high-low method to determine the estimating cost function with machine-hours as the cost driver.

    Question 2: Use the high-low method to determine the estimating cost function with kilowatt-hours as the cost driver.

    Question 3: For July, the company ran the machines for 3,000 hours and used 4,000,000 kilowatt-hours of power. The overhead costs totaled $114,000. Which cost driver was the best predictor for July?

    © BrainMass Inc. brainmass.com June 4, 2020, 12:18 am ad1c9bdddf

    Solution Summary

    The solution discusses the techniques of cost apportionment through high-low method.