Question

At a volume of 8,000 units, Pwerson Company incurred $32,000 in factory overhead costs, including $12,000 in fixed costs. If volume increases to 9,000 units and both 8,000 units and 9,000 units are within the relevant range, then the company would expect to incur total factory overhead costs of:

Answer 1

Total factory overhead costs =$34,500

Step-by-step explanation:

Variable cost are costs that vary with the volume of output.

The Total variable overhead = Total overhead - Total fixed cost

= $32,000 - $12,000

= $20,000

Variable overhead per unit= Total variable overhead/ units

$ 20,000 /8000 units= $2.5 per unit

Fixed overhead

The fixed costs are costs that remain within same activity. The don't vary with volume within an activity range.

Fixed factory overhead =$12,000

Total overhead at 9000 units

=($2.5 per unit× 9000)+ $12,000

Total factory overhead costs = $34,500

Answer 2

Total cost= $34,500

Step-by-step explanation:

Giving the following information:

At a volume of 8,000 units, Pwerson Company incurred $32,000 in factory overhead costs, including $12,000 in fixed costs.

Because the 9,000 units are between the relevant range, the fixed costs will remain constant.

First, we need to calculate the unitary variable overhead cost:

Unitary overhead= 20,000/8,000= $2.5 per unit

Now, we can calculate the total cost of 9,000 units:

Total cost= 9,000*2.5 + 12,000= $34,500