Fiske Corporation manufactures a popular regional brand of kitchen utensils. The design and variety have been fairly constant over the last three years. The managers at Fiske are planning for some changes in the product line next year, but first they want to understand better the relation between activity and factory costs as experienced with the current products. Discussions with the plant supervisor suggest that overhead seems to vary with labor-hours, machine-hours, or both. The following data were collected from the last three years of operations: Quarter Machine-Hours Labor-Hours Factory costs 1 18,850 14,905 $ 3,388,671 2 18,590 15,477 3,425,136 3 17,480 16,720 3,617,144 4 19,240 15,983 3,573,240 5 21,280 17,501 3,812,284 6 19,630 17,369 3,777,312 7 19,240 15,290 3,531,726 8 18,850 14,366 3,369,102 9 18,460 15,994 3,512,487 10 20,670 16,995 3,730,734 11 17,550 14,278 3,135,315 12 18,460 19,244 3,723,786 Required: Use the high-low method to estimate the fixed and variable portions of factory costs based on labor-hours. Managers expect the plant to operate at 24,000 labor-hours next quarter. Assuming the relationship remains the same with the new product line, what are the estimated quarterly factory costs? Use the high-low method to estimate the fixed and variable portions of factory costs based on labor-hours. Note: Round "Variable cost" answer to 2 decimal places. Variable cost (per labor-hour) $118.50 Fixed cost Managers expect the plant to operate at 24,000 labor-hours next quarter. Assuming the relationship remains the same with the new product line, what are the estimated quarterly factory costs? Note: Round "Variable cost" to 2 decimal places. Estimated quarterly factory costs $

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter8: Budgeting For Planning And Control

Section: Chapter Questions

Problem 40P: The controller for Muir Companys Salem plant is analyzing overhead in order to determine appropriate...

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Quarter	Machine-Hours	Labor-Hours	Factory costs
1	18,850	14,905	$ 3,388,671
2	18,590	15,477	3,425,136
3	17,480	16,720	3,617,144
4	19,240	15,983	3,573,240
5	21,280	17,501	3,812,284
6	19,630	17,369	3,777,312
7	19,240	15,290	3,531,726
8	18,850	14,366	3,369,102
9	18,460	15,994	3,512,487
10	20,670	16,995	3,730,734
11	17,550	14,278	3,135,315
12	18,460	19,244	3,723,786

Required:

Use the high-low method to estimate the fixed and variable portions of factory costs based on labor-hours.
Managers expect the plant to operate at 24,000 labor-hours next quarter. Assuming the relationship remains the same with the new product line, what are the estimated quarterly factory costs?

Use the high-low method to estimate the fixed and variable portions of factory costs based on labor-hours.

Note: Round "Variable cost" answer to 2 decimal places.

Variable cost (per labor-hour)	$118.50
Fixed cost

Managers expect the plant to operate at 24,000 labor-hours next quarter. Assuming the relationship remains the same with the new product line, what are the estimated quarterly factory costs?

Note: Round "Variable cost" to 2 decimal places.

Estimated quarterly factory costs

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