Posted: February 5th, 2019
Devry ACCT434 Week 3 homework
Problems/questionsProblem 1- Tessmer Manufacturing Company produces inventory in a highly automated assembly plant inOlathe,KS. The automated system is in its first year of operation and management is still unsure of the best way to estimate the overhead costs of operations for budgetary purposes. For the first six months of operation, the following data was collected: Machine-hours Kilowatt-hours Total Overhead Costs January 3,800 4,520,000 $138,000 February 3,650 4,340,000 136,800 March 3,900 4,500,000 139,200 April 3,300 4,290,000 136,800 May 3,250 4,200,000 126,000 June 3,100 4,120,000 120,000Question 1: Use the high-low method to determine the estimating cost function with machine-hours as the cost driver. (five points)Question 2: Use the high-low method to determine the estimating cost function with kilowatt-hours as the cost driver. (five points)Question 3: For July, the company ran the machines for 3,000 hours and used 4,000,000 kilowatt-hours of power. The overhead costs totaled $114,000. Which cost driver was the best predictor for July? (five points)Problem 2 -Louder Company manufactures part MNO used in several of its truck models. A total of 10,000 units are produced each year with production costs as follows:Direct materials $ 45,000Direct manufacturing labor 15,000Variable support costs 35,000Fixed support costs 25,000Total costs $120,000Louder Company has the option of purchasing part MNO from an outside supplier at $11.20 per unit. If MNO is outsourced, 40% of the fixed costs cannot be immediately converted to other uses.Question 1: What amount of the MNO production costs is avoidable? (five points)Question 2: Should the company outsource MNO? Why or why not? (five points)Question 3: What other items should the company consider before outsourcing any of the parts it manufactures? (five points)Question 1.1.Related to Problem #1, use the high-low method to determine the estimating cost function with machine-hours as the cost driver.(Points : 5) Question 2.2.Related to Problem #1, use the high-low method to determine the estimating cost function with kilowatt-hours as the cost driver.(Points : 5) Question 3.3.Related to Problem #1, for July, the company ran the machines for 3,000 hours and used 4,000,000 kilowatt-hours of power. The overhead costs totaled $114,000. Which cost driver was the best predictor for July?(Points : 5) Question 4.4.Related to Problem #2, what amount of the MNO production costs is avoidable?(Points : 5) Question 5.5.Related to Problem #2, should the company outsource MNO? Why or why not?(Points : 5) Question 6.6.Related to Problem #2, what other items should the company consider before outsourcing any of the parts it manufactures?(Points : 5)
