USA: +1 (725) 712-1730 
Sign in
Mansah Co., Ltd., of Ghana is a manufacturing company whose total factory overhead costs fluctuate considerably from year to year according to increases and decreases in the number of direct labor-hours worked in the factory. Total factory overhead costs at high and low levels of activity for recent years are given below Level of Activity Direct labor-hours Total factory overhead costs252,000 63,200 283,600 47,400 The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 47,400-hour level of activity as follows: Indirect materials (variable) Rent (fixed) Maintenance (mixed) $ 71,100 127,000 53,900 Total factory overhead costs $ 252,000 To have data available for planning, the company wants to break down the maintenance cost into its variable and fixed cost elements 1. Estimate how much of the $283,600 factory overhead cost at the high level of activity consists of maintenance cost (Hint To do this, it may be helpful to first determine how much of the $283 600 consists of indirect materials and rent Think about the behavior of variable and fixed
Expert Answer
1.
| Maintenance cost at high level of activity | $ 61,800 |
Total overhead cost at high level of activity = Indirect material cost ( Variable) + Rent ( Fixed ) + Maintenance Cost ( Mixed ) = $ 71,100 / 47,400 x 63,200 + $ 127,000 + Maintenance Cost = $ 283,600
Therefore, maintenance cost at high level of activity = $ 61,800.
2.
| Direct Labor Hours | Maintenance Cost | |
| High Level of Activity | 63,200 | $ 61,800 |
| Low Level of Activity | 47,400 | $ 53,900 |
| Change | 15,800 | 7,900 |
| Variable Cost Element | $ 0.50 | per DLH |
| Fixed Cost Element | $ 30,200 |
3.
| Total factory overhead cost | $ 261,480 |
Total factory overhead cost at an activity level of 52,140 DLH :
| $ | |
| Indirect Material ( 52,140 x $ 1.50) | 78,210 |
| Rent | 127,000 |
| Maintenance Cost ( 52,140 x $ 0.50 + $ 30,200) | 56,270 |
| Total Factory Overhead Cost | 261,480 |
