Question

Neevey Inc. tracks activity based on machine-hours. In March, Neevy used 3000 machine-hours. Manufacturing overhead costs were incurred as follows: $18000.....Utilities (a variable cost) $35300.....Maintenance (a mixed cost) $21000......Supervisor salaries (a fixed cost) $74300....Total overhead in March Total overhead in April was $87050 and machine-hours in April was 4500. Do not enter expenses as negative numbers. 1. How much of the April overhead must have been for Utilities? 2. How much of the April overhead must have been for Maintenance?

Answer 1

Answer 1

Computation of cost for Utilities in April

Particular		Amount ($)
Total Utilities in March		18,000
Machine Hours used in March	3000 machine-hours.
Cost Per Machine Hrs : ($18,000 / 3,000 hrs)		6
Machine Hrs used in April	4,500 machine-hours
Total Utilities cost in April : 4,500 machine-hours * $6		$27,000

Answer 2

Note : Supervisor salaries is a fixed cost , thus will remain same fot March & april ie $21000 per month

Computation of Maintenance cost for April.

Particular	Amount ($)
Total overhead cost in April	87,050
Less : Total Utilities cost in April (refer Answer 1 )	(27,000)
Less : Supervisor salaries for April	(21,000)
Maintenance cost in April.	39,050