The following selected data were taken from the accounting records of Colorado Enterprises:MonthMachine HoursManufacturing OverheadMay46,000$889,000June60,0001,130,000July68,0001,274,000August52,000980,000Manufacturing overhead consists of three different costs; (1) machine supplies (variable), (2) property taxes (fixed), and (3) plant maintenance (semivariable). July's overhead costs were $170,000 for machine supplies, $24,000 for property taxes, and $1,080,000 for plant maintenance.Required: A. Determine the machine supplies and property taxes for May.B. By using the high-low method, analyze Colorado's plant maintenance cost and calculate the monthly fixed portion and the variable cost per machine hour.C. Assume that present cost behavior patterns continue into future months. Estimate
the total amount of manufacturing overhead the company can expect in September if 56,000 machine hours are worked.
What will be an ideal response?
A. Machine supplies: $170,000 ÷ 68,000 hours = $2.50 per hour; 46,000 hours × $2.50 = $115,000
Property taxes: Fixed at $24,000
B. Plant maintenance in May: $889,000 - $115,000 - $24,000 = $750,000
Variable plant maintenance: ($1,080,000 - $750,000) ÷ (68,000 - 46,000) = $15 per hour
Fixed plant maintenance:
| Total plant maintenance for 68,000 hours | $1,080,000 |
| Less: Variable plant maintenance (68,000 × $15) | 1,020,000 |
| Fixed cost | $60,000 |
C. Manufacturing overhead at 56,000 hours:
| Machine supplies at $2.50 per hour | $140,000 |
| Property Taxes | 24,000 |
| Plant maintenance: | ? |
| Variable at $15 per hour | 840,000 |
| Fixed | 60,000 |
| Total | $1,064,000 |
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