ACTG 2300 Lecture 1: Notes w

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In-Class Review 1
ONE
1. Estimate how much of the overhead
Utilities = $52,000 / $40,000 = $1.30 utility cost / machine hour
July
+Total OH = $255,800
-Supervisor Salary = $70,000
= Maintenance = $185,800
-Utilities = $91,000 ($1.30*$70,000)
= Maintenance Only = $94,800
Second attempt
Utilities = $58,500 / $39,000 = $1.50 utility cost / machine hour
July
+Total OH = $244,230
-Supervisor Salary = $41,000
= Maintenance = $203,230
-Utilities = $103,500 ($1.50*$69,000)
= Maintenance Only = $99,730
2. High-Low Method
Machine Hours
Low May 40,000
High July 70,000
Maintenance Cost
May $62,400
July $94,800
Y = a + bx
($94,800 - $62,400) / (70,000 - 40,000) = $1.08 of maintenance cost per
machine hour
Y = a + bx
$94,800 = a + $1.08($70,000)
a = $19,200
o a = fixed cost
o for every month nova is operating, they will incur $19,200 hours in
fixed cost no matter what
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y = $19,200 + $1.08x
Second Attempt
Machine Hours
Low May 39,000
High July 69,000
Maintenance Cost
May $64,630
July $99,730
Y = a + bx
($99,730 - $64,630) / (69,000 - 39,000) = $1.17 of maintenance cost per
machine hour
Y = a + bx
$99,730 = a + $1.17($69,000)
a = $21,070
o a = fixed cost
o for every month nova is operating, they will incur $21,070 hours in
fixed cost no matter what
y = $21,070 + $1.17x
3. Total OH
Machine Hours
Low May 40,000
High July 70,000
Maintenance Cost
May $184,400
July $255,800
Y = a + bx
($255,800 - $184,400) / (70,000 - 40,000) = $2.38 of overhead cost per
machine hour
Y = a + bx
$184,400 = a + $2.38($40,000)
a = $89,200
o a = fixed cost
o for every month nova is operating, they will incur $89,200 hours in
fixed cost no matter what
y = $89,200 + $2.38x
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