Question

X Company wants to estimate overhead costs in March, when production is expected to be 1,400...

X Company wants to estimate overhead costs in March, when production is expected to be 1,400 units. To determine the parameters of its overhead cost function, it used account analysis with the January cost information below and when production was was 1,000 units.

Total  

Total Variable

Utilities

$43,600

$43,600      

Maintenance

61,000

27,450      

Supervision

22,000

0          

Using the resulting cost function, what is X Company's estimate of total overhead costs in March?

Business   Accounting   
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Answer #1

Utilities is a variable cost.

Utilities cost per unit = $43,600 / 1,000 units = $43.6

Maintenance has variable cost portion and fixed cost portion.

Maintenance variable cost = $27,450

Maintenance cost per unit = $27,450 / 1,000 units = $27.45

Maintenance fixed cost = Total cost - Variable cost

= $61,000 - $27,450

= $33,550

Supervision is a fixed cost

Total overhead costs in March = Utilities + Maintenance + Supervision

= ($43.6*1,400 units) + [($27.45*1,400 units) + $33,550] + $22,000

= $61,040 + $71,980 + $22,000

= $155,020

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