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1. BTC uses the cost formula Y = $5,300 + $0.60X to estimate its maintenance costs...

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Accounting

1. BTC uses the cost formula Y = $5,300 + $0.60X to estimate itsmaintenance costs where X represents machine hours. If the Augustbudget calls for 8,000 hours of planned machine time, whatmaintenance cost is expected to be incurred during August?

2. MCK bases its predetermined overhead rate on the estimatedmachine hours for the upcoming year. Its estimates for the upcomingappear below:

           Machinehours                                   52,800

           Variable manufacturing overhead      $4.10per machine hour

           Fixed manufacturingoverhead          $425,000

What is MCK's predetermined overhead rate based on theseestimates?

Answer & Explanation Solved by verified expert
4.4 Ratings (679 Votes)

Q. 1)

In this case X should be replaced by 8,000 hours and then the equation should be solved to get the answer.

Y = 5,300 + 0.60 × 8,000

    = 5,300 + 4,800

    = 10,100

Answer: The required cost is $10,100.

Q. 2)

Fixed overhead should be in per-hour, and then this should be added to variable rate to get the required rate.

Required rate = (Fixed overhead / Hours) + Variable overhead per hour

                        = ($425,000 / 52,800) + $4.10

                        = 8.05 + 4.10

                        = 12.15 per machine hour (Answer)
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