Question

Jurgenson Industries has compiled the data below concerning manufacturing overhead cost for its first year of operations. They believe that overhead cost is closely related to the number of batches processed and would like to develop a way of projecting overhead cost for budgeting and future operational decision-making.

Month	Number of Batches (X)	Manufacturing Overhead (Y)
January	309	$84,000
February	128	$41,000
March	249	$63,000
April	159	$44,000
May	216	$44,000
June	174	$48,000
July	264	$66,000
August	162	$46,000
September	147	$33,000
October	219	$66,000
November	303	$81,000
December	106	$41,000
TOTAL	2,436	$657,000

Use the high-low method to calculate the cost equation relating to Manufacturing Overhead and number of batches for the data above by writing Excel formulas to calculate the slope (variable cost) and intercept (fixed cost) in the spaces provided on your worksheet. Round your answers to the nearest one dollar. DO NOT USE THE BUILT IN EXCEL FUNCTIONS FOR SLOPE AND INTERCEPT—write formulas to calculate the high-low estimates.

Enter the resulting cost equation in the form y=a+bx in the space provided (this does not have to be an Excel formula.)

2.         Using your answers from #1, project total Manufacturing Overhead costs in a month in which 300 batches are processed and enter your answer in the space provided.

Answer 1

Variable cost per Batch:
			Cost	Batch
High activity			84000	309
Low activity			41000	106
Change			43000	203
Variable cost per bacth: Change in cost/ Change in batches
		43000 /203 = 211.82 per batch
Fixed cost:
Total cost of 309 batches			84000
Less: VC @ 211.82 per batch			65452
Fixed cost:			18548
Y = a+ bX
Y = 18548 + 211.82 X
Where, Y is total cost and X is number of batches
Req 2.
Total Overheads fr300 batches:
Variable cost (300*211.82)			63546
add: fixed cost			18548
Total Overheads fr300 batches:			82094