Reference no: EM132248530

Question - The Hamilton Mills Company cost accountant wants to determine the cost behavior for overhead. Based on observation and discussion with the plant workers, the following, accounts have been identified as the most relevant; Supervisor salaries and depreciation are believed to be generally fixed; Indirect labor, Utilities, and Purchasing, are generally believed to be variable; Indirect labor primarily Is responsible for moving, materials; Utility cost is primarily caused by the electricity to run machinery; and Purchasing costs are driven by the number of purchase orders. These accounts and their balances are given below:

	Indirect Labor	Utilities	Purchasing	Supervisory Salaries	Depreciation on Plant and Equipment
January	$28,500	$24,000	$76,400	$40,000	$13,000
February	31,600	21,200	70,800	46,000	13,000
March	33,600	25,000	75,200	64,000	13,000
April	41,400	25,000	80,400	55,600	13,000
May	40,000	25,000	79,800	50,800	13,000
June	34,000	25,000	79,400	34,000	13,000
Total	$209,100	$145,200	$462,000	$290,400	$78,000

Information on the activities is given below:

	# of moves	machine hours	purchase orders
January	340	5,400	250
February	380	5,200	300
March	400	5,800	450
April	500	6,200	380
May	480	6,000	340
June	420	5,600	200
Total	2,520	34,200	1,920

Required -

1. Why did the cost accountant decide that salaries and depreciation were fixed?

2. Calculate the average account balance for each of the 5 accounts and calculate the average monthly amount for each of the three drivers.

3. Calculate the fixed overhead and variable rates for each of the costs. Write an equation for the total overhead cost.

4. In January, 490 moves; 4,375 machine hours, and 220 purchase orders were expected. What is the amount of overhead predicted?