Question

Board​ Games, Inc. makes board games. The following data pertains to the last six​ months:

	Direct Labor Hours	Manufacturing Overhead
Month 1	​45,000	​$295,000
Month 2	60,000	$314,000
Month 3	​57,000	​$323,000
Month 4	​52,000	​$247,250
Month 5	​34,000	​$178,200
Month 6	28,000	$163,500

Based on this​ data, what would the estimated manufacturing overhead be at a level of

46,000

direct labor​ hours? (Round intermediary calculations to the nearest​ cent.)

A.

$248,200

B.

$160,160

C.

$248,200

D.

Cannot be determined from information given. 

Answer 1

Variable manufacturing overhead = (Highest activity manufacturing overhead - Lowest activity manufacturing overhead)/(Highest activity direct labor hours- Lowest activity direct labor hours)

= (314,000-163,500)/(60,000-28,000)

= 150,500/32,000

= $4.70 per direct labor hour

Fixed manufacturing overhead cost = Highest activity manufacturing overhead - Highest activity direct labor hours x Variable manufacturing overhead per direct labor hour

= 314,000- (60,000 x 4.70)

= 314,000-282,000

= $32,000

Estimated manufacturing overheads at a level of 46,000 direct labor​ hours = Fixed manufacturing overhead cost + Variable manufacturing overhead per direct labor hour x Direct labor hours used

= 32,000+ 4.70 x 46,000

= 32,000+216,200

= $248,200

Correct option is A.

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