Reference no: EM132825595

Question - Rover Company manufactures a single product. The Company keeps careful records of manufacturing activities from which the following information has been extracted:

	March-Low	June-High
Number of units produced	6,000
Cost of goods manufactured	P168,000	P257,000
Work in process inventory, beginning	P9,000	P32,000
Work in process inventory, ending	P15,000	P21,000
Direct materials cost per unit	P6	P6
Direct labor cost per unit	P10	P10
Manufacturing overhead cost, total	?	?

The company's manufacturing overhead consists of both variable and fixed cost elements. To have data available for planning, management wants to determine how much of the overhead cost is variable with units produced and how much of it is fixed per month.

Required -

1. For both March and June, estimate the amount of manufacturing overhead cost added to production. The Company had no underapplied or overapplied overhead in either month.

2. Using the high-low method, estimate a cost formula for manufacturing overhead. Express the variable portion of the formula in terms of a variable rate per unit of product.

3. If 7,000 units are produced during a month, what would be the cost of goods manufactured? (Assume that the work in process inventories do not change and there is no underapplied or overapplied overhead cost for the month.