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cost is fixed and how much is variable. The following data are the
only records available:
Month Machine-hours Overhead Costs
February 1,700 $20,500
March 2,800 22,250
April 1,000 19,950
May 2,500 21,500
June 3,500 23,950
Using the high-low method, determine the overhead cost equation.
Use machine-hours as your cost driver.
4. Question :
(TCO 5) Kirkland Company manufactures a part for use in its
production of hats. When 10,000 items are produced, the costs per
unit are:
Direct materials $0.60
Direct manufacturing labor 3.00
Variable manufacturing overhead 1.20
Fixed manufacturing overhead 1.60
Total $6.40
Mike Company has offered to sell to Kirkland Company 10,000 units
of the part for $6.00 per unit. The plant facilities could be used to
manufacture another item at a savings of $9,000 if Kirkland accepts
the offer. In addition, $1.00 per unit of fixed manufacturing overhead
on the original item would be eliminated.
a. What is the relevant per unit cost for the original part?