Question

The following are monthly high and low levels of Direct labor hours and total manufacturing overhead...

  1. The following are monthly high and low levels of Direct labor hours and total manufacturing overhead for Sam Manufacturing:

Direct                          Total

Labor                   Manufacturing

Hours                     Overhead      

                        Highest observed level           6,000                     $17,000

                        Lowest observed level                        4,000                       14,000

              In a month in which 5,000 direct labor hours are used, the fixed element of total

              Manufacturing overhead costs should be approximately:

  1. $15,000.
  2. $8,000.
  3. $7,500.
  4. $8,000 plus $1.50 per unit.
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