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Lady bird [3.3K]
3 years ago
9

The following information is available regarding the total manufacturing overhead of Olsen Company for a recent four-month perio

d. Machine Hours Mfg. Overhead April 90,000 $ 170,000 May 80,000 $ 153,000 June 110,000 $ 198,000 July 95,000 $ 181,000 Using the high-low method, compute the fixed element of Olsen's
Business
1 answer:
Eduardwww [97]3 years ago
6 0

Answer:

$33,000

Explanation:

The calculation of the fixed cost and the variable cost per machine hour by using high low method is shown below:

Variable cost per hour = (High manufacturing overhead cost - low manufacturing overhead cost) ÷ (High machine hours - low machine hours)

= ($198,000 - $153,000) ÷ (110,000 hours - 80,000 hours)

= $45,000 ÷ 30,000 hours

= $1.5

Now the fixed cost is

= High manufacturing overhead cost - (High machine hours × Variable cost per hour)

= $198,000 - (110,000 hours × $1.5)

= $198,000 - $165,000

= $33,000

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