In am month in which 30,000 equivalent full units are produced, Manufacturing overhead should be?
Units Manufacturing overhead
hi 117,000 306,000
low 81,000 234,000
The answer is 132,000(I need to know what steps they did to figure that out)
You have not provided enough input information to arrive at any value for overhead.
To find the manufacturing overhead for a specific number of units produced, we can use the high-low method.
First, let's find the variable cost per unit of manufacturing overhead. The variable cost per unit is calculated by taking the difference in manufacturing overhead between the high and low levels of units, and dividing it by the difference in units between the high and low levels.
Difference in manufacturing overhead: $306,000 - $234,000 = $72,000
Difference in units: 117,000 units - 81,000 units = 36,000 units
Variable cost per unit = $72,000 / 36,000 units = $2 per unit
Now that we have the variable cost per unit, we can calculate the fixed cost component of the manufacturing overhead. We'll take the total manufacturing overhead at either the high or low point, and subtract the variable cost component from it.
Using the given data, let's use the high level of 117,000 units to calculate the fixed cost component of manufacturing overhead:
Fixed cost component = Total manufacturing overhead - (Variable cost per unit x Number of units)
= $306,000 - ($2 x 117,000 units)
= $306,000 - $234,000
= $72,000
Now, we can calculate the total manufacturing overhead for a specific number of units. Let's use the given number of 30,000 units:
Manufacturing overhead = Fixed cost component + (Variable cost per unit x Number of units)
= $72,000 + ($2 x 30,000 units)
= $72,000 + $60,000
= $132,000
Therefore, when producing 30,000 equivalent full units, the manufacturing overhead should be $132,000.