Question

E3-42A (similar to) Question Help Pur Source produces agricultural irrigation equipment. During a year, the amount of overhead costs on a per month basis varies in relation to the machine hours used in a given year. The low for the past year was 4,230 hours, and the expense associated was $88,880. The high for the period was 9,300 hours, and the associated expense was $147,467. During the low month, the $88,880 overhead costs consisted of indirect materials of $42,300 (a variable expense), rent of $34,000 (a fixed expense), and maintenance costs of $12,580 (a mixed expense). Requirements Requirement 1a. Given the breakdown of expenses in the low period, what are the estimated costs for indirect materials during the high period? (Round to the nearest whole dollar.) The estimated costs for indirect materials are $ 93000. Requirement 1b. Given the breakdown of expenses in the low period, what are the estimated costs for rent during the high period? (Round to the nearest whole dollar.) The estimated costs for rent are $ Requirements 1. Given the breakdown of expenses in the low period, what are the estimated costs for (a) indirect materials, (b) rent, and (c) maintenance during the high period? 2. What is the cost function for maintenance costs? 3. What amount of maintenance costs would be expected with 7,800 machine hours of work? 4. What would be the total overhead costs at 7,800 machine hours? Print Done

Answer 1

Answer:-

1) Indirect Material Cost Per Hour = $42,300/4230 hours = $10 per hour

Estimated Cost for indirect material for high period = 9,300 hours * $10 per hour = $93,000

The estimated costs for indirect materials are $93,000

2) Rent Cost Per Hour = 34000/4230 = $8.03 Per hour

Estimated Cost for Rent for high Period = 9300 hours *$8.03 per hour = 74751.77

The Estimated Costs for Rent is $74751.77