At a volume of 5,000 units, Pwerson Company incurred $32,000 in factory overhead costs, including $14,000 in fixed costs. If volume increases to 6,000 units and both 5,000 units and 6,000 units are within the relevant range, then the company would expect to incur total factory overhead costs of: (Round intermediate calculations to 2 decimal places.)
A) $35,600
B) $21,600
C) $32,000
D) $18,000

Question

Quizplus · Accepted Answer

Using the high-low method:
Variable factory overhead cost = (Total factory overhead cost at high volume - Total fixed cost)/ Total units at high volume - Total units at low volume
= ($32,000 - $14,000)/ (6,000 - 5,000)
= $18,000/1,000 = $18 per unit
Total factory overhead cost at 6,000 units = Fixed factory overhead cost + (Variable factory overhead cost per unit x Number of units produced)
= $14,000 + ($18 x 6,000)
= $14,000 + $108,000
= $122,000
Therefore, the company would expect to incur total factory overhead costs of $35,600 at a volume of 6,000 units.

At a Volume of 5,000 Units, Pwerson Company Incurred $32,000