The manager at Wheeling Mulch has been trying to calculate the portion of the company's overhead expenses that is fixed and the portion that is variable.Over the past twelve months,the number of yards of mulch processed was highest in July,when the total monthly overhead costs totaled $28,000 for 32,000 yards of mulch processed.The lowest number of yards of mulch processed in the last twelve months occurred in October,when total overhead costs were $26,000 for 28,000 yards of mulch processed.What is the fixed portion of the monthly overhead expenses?
A)$0
B)$12,000
C)$16,000
D)$26,000

Question

Quizplus · Accepted Answer

B)
Highest cost $28,000 Highest activity 32,000
Lowest cost $26,000 Lowest activity 28,000
Difference $2,000 4,000
NOW divide the difference in the cost by the difference in the activity equals Variable cost per unit.$2,000/ 4,000 = $ .50
Put the numbers into the Cost Equation: $28,000 = $.50 (32,000)+ f
$12,000 = f

The Manager at Wheeling Mulch Has Been Trying to Calculate