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Master Inc. is also exploring the possibility of investing in a company, Force Frame Pte Ltd. Force Frame Pte Ltd has furnished the following records of the total overheads and the number of machine hours over a 6 months period in 2021. Month July August September October November December Machine Hours 1,364 2,406 842 607 725 2,108 Factory utilities Factory supplies Rental of facilities Total overhead Costs ($) 32,290 51.119 22,912 15,139 19,545 46,700 The components of October's total overhead costs were as follows: $ 8,180 4,249 2,710 15,139 Cost behavior Mixed Variable Fixed a) Using the high-low method, construct the cost formula for factory utilities. b) Using the cost formula derived in (a), estimate the overhead costs if the total machine hours are expected to be 2,000 in May 2022. c) Explain why is it necessary to separate a mixed cost into its variable and fixed components and why would cost behaviour change outside of the relevant range? Give an example Master Inc. is also exploring the possibility of investing in a company, Force Frame Pte Ltd. Force Frame Pte Ltd has furnished the following records of the total overheads and the number of machine hours over a 6 months period in 2021. Month July August September October November December Machine Hours 1,364 2,406 842 607 725 2,108 Factory utilities Factory supplies Rental of facilities Total overhead Costs ($) 32,290 51.119 22,912 15,139 19,545 46,700 The components of October's total overhead costs were as follows: $ 8,180 4,249 2,710 15,139 Cost behavior Mixed Variable Fixed a) Using the high-low method, construct the cost formula for factory utilities. b) Using the cost formula derived in (a), estimate the overhead costs if the total machine hours are expected to be 2,000 in May 2022. c) Explain why is it necessary to separate a mixed cost into its variable and fixed components and why would cost behaviour change outside of the relevant range? Give an example
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Auditing and Assurance services an integrated approach
ISBN: 978-0132575959
14th Edition
Authors: Alvin a. arens, Randal j. elder, Mark s. Beasley
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