Patrick Ross, the president of Ross\'s Wild Game Company, has asked for informat
ID: 2352255 • Letter: P
Question
Patrick Ross, the president of Ross's Wild Game Company, has asked for information about the cost behavior of manufacturing overhead costs. Specifically, he wants to know how much overhead cost is fixed and how much is variable. The following data are the only records available:Month Machine-hours Overhead Costs
February 1,700 $20,500
March 2,800 22,250
April 1,000 19,950
May 2,500 21,500
June 3,500 23,950
Using the high-low method, determine the overhead cost equation. Use machine-hours as your cost driver.
Please show work with answer
Explanation / Answer
Highest overhead cost: June $23950 (3500 machine hours) Lowest overhead cost: April $19950 (1000 machine hours) Variable cost = (23950 - 19950)/(3500 - 1000) = $1.6 per machine hours Fixed cost = 23950 - 1.6 x 3500 = $18350 Overhead cost equation = $18350 + $1.6 x Machine Hours Hope this helps!