Millie Industries manufactures two products, Monogram and Signature, for industrial use. Millie's manufacturing facility is highly...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Millie Industries manufactures two products, Monogram and Signature, for industrial use. Millie's manufacturing facility is highly automated, with very little direct labour being involved in the process. The company has decided that they would like to look more closely at the overhead and determine if they can get a better idea of the true cost of their products. The total direct labour cost in the last fiscal year was $1,500,000 and total manufacturing overhead in the last fiscal year was approximately $11,520,000. Relevant manufacturing overhead information for the past 12 months is provided in Exhibit I. After discussions with the production manager, you have determined that machine hours is the cost driver that most directly affects manufacturing overhead. Below is a summary of costs based on 40,000 hours per month. Supervisor salaries Maintenance costs Depreciation Utilities $175,000 793,000 80,000 150,000 Management believes that supervisor salaries and depreciation costs are primarily fixed and approximately equal from month to month. Whereas utilities are primarily variable and maintenance cost is a mixed cost. Required: Exhibit I Miscellaneous Cost Breakdown by Month Month Cost Machine Hours January $865,000 28,750 February 781,500 20,000 March 814,500 26,250 April 778,340 25,500 May 1,082,300 35,000 June 1,226,400 39,000 July 1,048,600 33,750 August 1,198,600 39,375 September 1,218,500 37,500 October 1,198,000 40,000 November 665,600 23,750 December 642,660 21,000 1. Estimate how much of the overhead cost in February was maintenance cost. (2 marks) 2. Using the high-low method, estimate a cost formula for maintenance. (4 marks) 3. Provide the cost function for total overhead costs. (4 marks) 4. Assume Millie has decided to use the cost function you have developed in part 3 as a base to analyze costs for the upcoming fiscal year. Determine the cost function for total manufacturing overhead assuming the following: (4 marks) Supervisor salaries will be approximately 4% higher than in the past year. The utility company has announced that rates will be higher next year. The company believes this increase will cause utilities to increase by 4.5% per month. The fixed portion of maintenance costs will increase by $15,000 per month and the variable component will increase by 2.5%. 5. Production next January is expected to be 28,000 hours. What total overhead cost would you expect? (2 marks) Millie Industries manufactures two products, Monogram and Signature, for industrial use. Millie's manufacturing facility is highly automated, with very little direct labour being involved in the process. The company has decided that they would like to look more closely at the overhead and determine if they can get a better idea of the true cost of their products. The total direct labour cost in the last fiscal year was $1,500,000 and total manufacturing overhead in the last fiscal year was approximately $11,520,000. Relevant manufacturing overhead information for the past 12 months is provided in Exhibit I. After discussions with the production manager, you have determined that machine hours is the cost driver that most directly affects manufacturing overhead. Below is a summary of costs based on 40,000 hours per month. Supervisor salaries Maintenance costs Depreciation Utilities $175,000 793,000 80,000 150,000 Management believes that supervisor salaries and depreciation costs are primarily fixed and approximately equal from month to month. Whereas utilities are primarily variable and maintenance cost is a mixed cost. Required: Exhibit I Miscellaneous Cost Breakdown by Month Month Cost Machine Hours January $865,000 28,750 February 781,500 20,000 March 814,500 26,250 April 778,340 25,500 May 1,082,300 35,000 June 1,226,400 39,000 July 1,048,600 33,750 August 1,198,600 39,375 September 1,218,500 37,500 October 1,198,000 40,000 November 665,600 23,750 December 642,660 21,000 1. Estimate how much of the overhead cost in February was maintenance cost. (2 marks) 2. Using the high-low method, estimate a cost formula for maintenance. (4 marks) 3. Provide the cost function for total overhead costs. (4 marks) 4. Assume Millie has decided to use the cost function you have developed in part 3 as a base to analyze costs for the upcoming fiscal year. Determine the cost function for total manufacturing overhead assuming the following: (4 marks) Supervisor salaries will be approximately 4% higher than in the past year. The utility company has announced that rates will be higher next year. The company believes this increase will cause utilities to increase by 4.5% per month. The fixed portion of maintenance costs will increase by $15,000 per month and the variable component will increase by 2.5%. 5. Production next January is expected to be 28,000 hours. What total overhead cost would you expect? (2 marks)
Expert Answer:
Answer rating: 100% (QA)
1 To estimate the maintenance cost in February we need to determine the variable portion of the maintenance cost First lets identify the high and low months based on machine hours High Month June 3900... View the full answer
Related Book For
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr
Posted Date:
Students also viewed these accounting questions
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...
-
What is the result of executing the Clownfish program? A. The code compiles and prints swim! B. The code compiles and prints fish! C. The code compiles and prints a stack trace. D. One line of the...
-
Use the Three-Sector Model to explain the effects fiscal policy had on the U.S. economy. Assume the United States had highly mobile international capital markets and a flexible exchange rate.
-
Brentwood Disaster Relief (BDR) is a local not-for-profit organization working to help victims of disasters. Required The following are various resources and activities of the organization. Indicate...
-
The \(920-\mathrm{mm}\)-diameter, \(1.6-\mathrm{mm}\)-thick spherical pressure vessel in Figure 9.27 is a filament wound quasi-isotropic composite laminate with a single 50-mm-diameter entrance hole....
-
Figure is a questionnaire designed by an employee of Green Toe Textiles, which specializes in manufacturing mens socks. Di Wooly wrote the questionnaire because, as the office manager at headquarters...
-
An aerobatic airplane pilot experiences weightlessness as she passes over the top of a loop-the-loop maneuver. The acceleration of gravity is 7.8 m/s 2 . If her speed is 470 m/s at this time, find...
-
Today is March 15, 2022. Your partner called you, CPA, into her office to discuss a new, special engagement. Your firm has been engaged to assist a group of investors, led by John Keystone, with a...
-
Suppose you have been assigned an important position in Foreign Office where meeting people from different backgrounds and culture is normal practice. How would you transform your communication...
-
Jim Rice made deposits of $450 at the end of each year for seven years. The interest rate is 12% compounded annually. The value of Jim's annuity at the end of seven years is : 2. Mell's Co. borrowed...
-
Sunland, Inc. leased equipment from Tower Company under a four-year lease requiring equal annual payments of $264152, with the first payment due at lease inception. The lease does not transfer...
-
CALCULATE ALL OF THESE Gross interest Income Gross interest expenses Net interest income (Spread) Provision for loan losses NII after loan losses ( NII after PLL) Non interest income Non interest...
-
Mr. Fix it is a light industrial manufacturer that began operations last year. Its most recent income statement and balance sheet are provided below (figures 1 and 2). Having had a most successful...
-
Write about how you will be successful in my academic or career. Describer barriers, or roadblocks that exist to achieve academic success in college. Write about the road to academic achievement for...
-
Answer the following two independent questions. a. MM Corporation is considering several proposed investments for the coming budget year. MM produces electrical apparatus for industrial complexes....
-
Coherent states are potentially an interesting basis to consider in which to express states on the Hilbert space. Are they a good basis, satisfying qualities that we desire of a basis on the Hilbert...
-
In this chapter, we had only expressed eigenstates of the harmonic oscillator Hamiltonian through repeated action of the raising operator, \(\hat{a}^{\dagger}\). This gives us a concrete algorithm...
-
A simple model for radioactive decay of an unstable nuclear isotope is as follows.3 Consider the potential illustrated in Fig. 7.9, in which there is a hard, infinite barrier at the spatial origin, a...
Study smarter with the SolutionInn App