(Appendix 5A) The Blaine Corporation is a highly automated manufacturer. At an activity level of 6,000 machine setups, total overhead costs equal $240,000. Of this amount, depreciation totals $80,000 (all fixed) and lubrication totals $72,000 (all variable). The remaining $88,000 of the total overhead cost consists of utility cost (mixed). At an activity level of 9,000 setups, utility cost totals $112,000.
Assume that the relevant range includes all of the activity levels mentioned in this problem.
-If 7,800 setups are projected for the next period,total expected overhead cost would be closest to:
A) $156,000
B) $236,000
C) $214,400
D) $276,000

Question

Quizplus · Accepted Answer

11ea7761_188a_e4ec_81a5_43637e4f3f17_TB2580_00 Variable cost = Change in cost ÷ Change in activity = $24,000 ÷ 3,000 machine setups = $8.00 per setup
Fixed cost element = Total cost - Variable cost element
= $112,000 - ($8.00 per setup × 9,000 units) = $40,000
Fixed costs:
 11ea7761_188a_e4ed_81a5_ff2860abfe5f_TB2580_00 Variable costs:
 11ea7761_188b_0bfe_81a5_4fee815eaa7f_TB2580_00 Y = a + bX = $120,000 + ($20 per machine setup × 7,800 machine setups) = $276,000

(Appendix 5A) the Blaine Corporation Is a Highly Automated Manufacturer