Question
Amfac Company manufactures a single product. The company keeps careful records of manufacturing activities, from which the following information has been extracted: Level of Activity
Amfac Company manufactures a single product. The company keeps careful records of manufacturing activities, from which the following information has been extracted:
Level of Activity | ||||
March-Low | June-High | |||
Number of units produced | 5,000 | 9,000 | ||
Cost of goods manufactured | $268,000 | $397,000 | ||
Work in process inventory, beginning | $29,000 | $21,000 | ||
Work in process inventory, ending | $52,000 | $15,000 | ||
Direct materials cost per unit | $10 | $10 | ||
Direct labor cost per unit | $12 | $12 | ||
Manufacturing overhead cost, total | ? | ? | ||
The company's manufacturing overhead cost consists of both variable and fixed cost elements. To have data available for planning, management wants to determine how much of the overhead cost is variable with units produced and how much of it is fixed per month.
Required:
1. For both March and June, determine the amount of manufacturing overhead cost added to production.
(Hint: A useful way to proceed might be to construct a schedule of cost of goods manufactured.)
2. By means of the high-low method of cost analysis, estimate a cost formula for manufacturing overhead. Express the variable portion of the formula in terms of a variable rate per unit of product.
3. Assume that Amfac produced 8,000 units in September. What will be the cost of goods manufactured? (Assume that beginning and ending work-in-process inventories were $18,000 and $10,000 respectively.)
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