Question

# Jurgenson Industries has compiled the data below concerning manufacturing overhead cost for its first year of...

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)

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.

 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

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