During the months of April through September, the following total utility costs were paid at various production volumes:<?xml:namespace prefix = o ns =

PROBLEM#1

During the months of April through September, the following total utility costs were paid at various production volumes:<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

a. Use the high-low method to calculate the cost formula utility costs.

b. If the production volume were expected to be 22,000 units for the month of November, what amount of total costs would be expected?

PROBLEM#2

 Erca, Inc. produces automobile bumpers. Overhead is applied on the basis of machine hours required for cutting and fabricating. A predetermined overhead application rate of $15.00 per machine hour was established for 2009.

(a.) If 9,000 machine hours were expected to be used during 2009, how much overhead was expected to be incurred?

(b.) Actual overhead incurred during 2009 totaled $135,000, and 9,200 machine hours were used during 2009. Calculate the amount of over-or underapplied overhead for 2009.

(c.) Explain the accounting necessary for the over- or underapplied overhead for the year.