Answered step by step
Verified Expert Solution
Question
1 Approved Answer
undefined PROBLEM 6-5 Applying the High-Low Method and Cost Behaviour (LO2-CC9] Sawaya Co., Ltd., of Japan, is a manufacturing company whose total factory overhead costs
undefined
PROBLEM 6-5 Applying the High-Low Method and Cost Behaviour (LO2-CC9] Sawaya Co., Ltd., of Japan, is a manufacturing company whose total factory overhead costs fluctuate con- siderably from year to ycar according to increases and decreases in the number of direct labour-hours worked in the factory. Total factory overhead costs (in Japanese yen, denoted Y) at high and low levels of activity for recent years are provided below: Low Level of Activity High 150,000 15,275,000 Direct labour-hours Total factory overhead costs 100,000 12,450,000 The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 100,000-hour level of activity as follows: Indirect materials (V) Rent (F) Maintenance (M) Total factory overhead costs V = variable; F= fixed; M = mixed. 4,200,000 5,500,000 2,750,000 12,450,000 To have data available for planning, the company wants w brak ile maintenance cost down into its variable and fixed cost elements. Required: 1. Estimate how much of the 15,275,000 factory overhead cost at the high level of activity consists of maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the 15,275,000 consists of indirect materials and rent. Think about the behaviour of variable and fixed costs!) 3. What total factory overhead costs would you expect the company to incur at an operating level of 70,000 direct labour-hoursStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started