Week 1 p2-17 p2-19 p2-21 p-24

Week 1 P2-17 P2-19 P2-21 P-24

 Please complete the following problems:


1.    Problem 2-17 – Echeverria SA

2.    Problem 2-19 – Sebolt Wire Company
3.    Problem 2-21 – Golden Company
4.    Problem 2-24 – Heritage Company

PROBLEM 2-17 High-Low Method; Predicting Cost [LO3,LO4]


Echeverria SA is an Argentinan manufacturing company whose total factory overhead costs fluctuate somewhat from year to year according to the number of machine-hours worked in its production facility. These costs (in Argentinian pesos) at high and low levels of activity over recent years are given below:

Level of Activity

 Low high

Machine hours 60,000 80,000

Total factory overhead cost 274,000pessos 312,000pessos


The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 60,000 machine-hours level of activity as follows:

Indirect materials(variable) 90,000 Pessos

Rent(fixed) 130,000

 Maintenance(mixed) 54,000

           Total factory overhead costs 274,000 pessos


For planning purposes, the company wants to break down the maintenance cost into its variable and fixed cost elements.



1. Estimate how much of the factory overhead cost of 312,000 pesos at the high level of activity consists of maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the 312,000 pesos cost consists of indirect materials and rent.
Think about the behavior of variable and fixed costs.)
2. Using the high-low method, estimate a cost formula for maintenance.
3. What total overhead costs would you expect the company to incur at an operating level of 65,000 machine-hours?

PROBLEM 2-19 High-Low and Scattergraph Analysis [LO4]

Sebolt Wire Company heats copper ingots to very high temperatures by placing the ingots in a large heat coil. The heated ingots are then run through a shaping machine that shapes the soft ingot into wire. Due to the long heat-up time, the coil is never turned off. When an ingot is placed in the coil, the temperature is raised to an even higher level, and then the coil is allowed to drop to the “waiting” temperature between ingots. Management needs to know the variable cost of power involved in heating an ingot and the fixed cost of power during “waiting” periods. The following data on ingots processed and power costs are available:

Month Number of ingots Power cost

January 110 $5,500

February 90 $4,500

March 80 $4,400

April 100 $5,500

May 130 $6,000

June 120 $5,600

July 70 $4,000

August 60 $3,200

September 50 $3,400

October 40 $2,400



1. Using the high-low method, estimate a cost formula for power cost. Express the formula in the form bX.
2. Prepare a scattergraph by plotting ingots processed and power cost on a graph. Draw a straight line though the two data points that correspond to the high and low levels of activity. Make sure your line intersects the Y-axis. 
3. Comment on the accuracy of your high-low estimates assuming a least-squares regression analysis estimated the total fixed costs to be $1,185.45 per month and the variable cost to be $37.82 per ingot. How would the straight line that you drew in requirement 2 differ from a straight line that minimizes the sum of the squared errors?

PROBLEM 2-21 High-Low Method; Predicting Cost [LO3,LO4]

Golden Company’s total overhead cost at various levels of activity are presented below:

Month Machine-hours Total overhead cost

March 50,000 $194,000

April 40,000 $170,200

May 60,000 $217,800

June 70,000 $241,600


Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 40,000 machine-hour level of activity is as follows:

Utilities(variable) $52,000

Supervisory salaries(fixed) 60,000

Maintenance(mixed) 58,200

Total overhead cost $170,200


The company wants to break down the maintenance cost into its variable and fixed cost elements.



1. Estimate how much of the $241,600 of overhead cost in June was maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $241,600 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs within the relevant range.) 
2. Using the high-low method, estimate a cost formula for maintenance. 
3. Express the company’s total overhead cost in the form bX
4. What total overhead cost would you expect to be incurred at an activity level of 45,000 machine-hours?

PROBLEM 2-24 Cost Classification and Cost Behavior [LO2,LO3LO6]

Heritage Company manufactures a beautiful bookcase that enjoys widespread popularity. The company has a backlog of orders that is large enough to keep production going indefinitely at the plant’s full capacity of 4,000 bookcases per year. Annual cost data at full capacity follow:

Direct materials used (wood and glass) $430,000

Administrative office salaries $110,000

Factory supervision $70,000

Sales commissions $60,000

Depreciation, factory building $105,000

Depreciation, administrative office equipment $2,000

Indirect materials, factory $18,000

Advertising $100,000

Insurance, factory $6,000

Administrative office supplies(billing) $4,000

Property taxes, factory $20,000

Utilities, factory $45,000



1. Prepare an answer sheet with the column headings shown below. Enter each cost item on your answer sheet, placing the dollar amount under the appropriate headings. As examples, this has been done already for the first two items in the list above. Note that each cost item is classified in two ways: first, as either variable or fixed with respect to the number of units produced and sold; and second, as either a selling and administrative cost or a product cost. (If the item is a product cost, it should also be classified as either direct or indirect as shown.)


Cost behaviour Selling for administrative cost Product cost

Cost item Variable Fixed Direct Indirect*

Materials used $430,000 $430,000

Administrative office

 Salaries $110,000 $110,000

*To units of product

2. Total the dollar amounts in each of the columns in (1) above. Compute the average product cost per bookcase.

3. Due to a recession, assume that production drops to only 2,000 bookcases per year.
Would you expect the average product cost per bookcase to increase, decrease, or remain unchanged? Explain. No computations are necessary.
4. Refer to the original data. The president’s next-door neighbor has considered making himself a bookcase and has priced the necessary materials at a building supply store. He has asked the president whether he could purchase a bookcase from the Heritage Company “at cost,” and the president has agreed to let him do so.
a. Would you expect any disagreement between the two men over the price the neighbor should pay? Explain. What price does the president probably have in mind? The neighbor?
b. Because the company is operating at full capacity, what cost term used in the chapter might be justification for the president to charge the full, regular price to the neighbor and still be selling “at cost”? Explain. 

Calculate your paper price
Pages (550 words)
Approximate price: -

Why Work with Us

Top Quality and Well-Researched Papers

We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.

Professional and Experienced Academic Writers

We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.

Free Unlimited Revisions

If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.

Prompt Delivery and 100% Money-Back-Guarantee

All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.

Original & Confidential

We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.

24/7 Customer Support

Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

Calculate the price of your order

Total price:

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.


Essay Writing Service

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.


Admission Essays & Business Writing Help

An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.


Editing Support

Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.


Revision Support

If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.