The Grind Company has been having some difficulties estimating its manufacturing overhead costs. In the past, manufacturing overhead costs have been related to production levels. However, some production managers have indicated that the size of their production lots might also be having an impact on the amount of their monthly manufacturing overhead costs. In order to investigate this possibility, the company collected information on its monthly manufacturing overhead costs, production in units, and average production lot size for 2011.
Production Manufacturing Average Monthly Months Units OH costs Production lot sixe 1 75,000 925,800 20 2 90,000 843,875 19 3 65,000 910,125 24 4 80,000 946,000 19 5 55,000 879,000 24 6 50,000 825,000 18 7 85,000 960,000 22 8 105,000 1,053,500 25 9 102,000 1,020,000 23 10 68,000 905,000 20 11 75,000 928,000 22 12 95,000 995,000 24 Required:
(a) Use the high-low method to estimate next month's manufacturing overhead costs, assuming the company is planning to produce 92,000 units.
(b) Use the high-low method to estimate next month's manufacturing overhead costs, assuming the company is planning to run a 21-lot size.
The Heidi Company produces a single product and has total costs ranging from $321,875 to $966,875 . Sales volume in 2010 was 32,000, and operating income was $45,125. Heidi's product is highly specialized; therefore, no units are kept in inventory.
Required:
(a) Determine the cost equation for Heidi's costs.
(b) Prepare a contribution margin income statement for 2010 including separate columns for total dollars, per unit dollars, and percentages.
(c) Determine the break-even point.