The following data pertains to activity and costs for two months: Assuming that these activity levels are within the relevant range, the manufacturing overhead for July was:
A)$10,000
B)$11,700
C)$19,000
D)$9,300

Question

The following data pertains to activity and costs for two months:  Assuming that these activity levels are within the relevant range, the manufacturing overhead for July was:
A)$10,000 
B)$11,700 
C)$19,000 
D)$9,300

Quizplus · Accepted Answer

The manufacturing overhead cost formula is Y = a + bX, where Y is the estimated manufacturing overhead cost, a is the fixed manufacturing overhead cost, b is the variable manufacturing overhead cost per unit of activity, and X is the level of activity. By using the high-low method, we can calculate the variable manufacturing overhead cost per machine hour as (27,320 - 22,400) / (2,800 - 2,000) = $5.20 per machine hour. Then, we can find the fixed manufacturing overhead cost by subtracting the variable cost from the total cost at either the high or low level of activity: $22,400 - ($5.20 × 2,000) = $11,700. Therefore, the answer is B.

The Following Data Pertains to Activity and Costs for Two