The GH Manufacturing Company makes a product called Z. Some of the manufacturing expenses are easily identified as fixed or variable directly with production. The cost accountant of the company is confronted with the problem of preparing a flexible budget for the coming year and wishes to determine the fixed and variable elements of the mixed factory overhead. The following details are provided for the first 10 months of the past year:
Number of Units Mixed Factory
|
Month |
Number of Units Produced x Overhead y |
Mixed Factory Overhead y |
|
1 |
1,500 |
$ 800 |
|
2 |
2,000 |
1,000 |
|
3 |
3,000 |
1,350 |
|
4 |
2,500 |
1,250 |
|
5 |
3,000 |
1,300 |
|
6 |
2,500 |
1,200 |
|
7 |
3,500 |
1,400 |
|
8 |
3,000 |
1,250 |
|
9 |
2,500 |
1,150 |
|
10 |
1,500 |
800 |
|
25,000 |
$11,500 |
Determine the fixed and variable elements of the mixed factory overhead using the high low
method.
(SMA, adapted)