Question

The manager at Screaming Trees has been trying to calculate the portion of the​ company's overhead...

The manager at Screaming Trees has been trying to calculate the portion of the​ company's overhead expenses that is fixed and the portion that is variable. Over the past twelve​ months, the number of yards of processed was highest in​ July, when the total monthly overhead costs totaled \$ 28,000 for 32,000 yards of mulch processed. The lowest number of yards of mulch processed in the last twelve months occurred in​ October, when total overhead costs were \$ 23,000 for 25,000 yards of mulch processed. What is the fixed portion of the monthly overhead​ expenses?

Homework Answers

Answer #1
 Highest Cost \$28,000 Lowest Cost \$23,000 Difference \$5,000 Highest Activity 32,000 Lowest Activity 25,000 Difference 7,000 Variable cost per unit = Divide the difference in the cost by the difference in the activity = \$5,000/7,000 = \$0.71 Highest Lowest variable cost \$22,857 \$17,857 Fixed Cost \$5,143 \$5,143
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