Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Actual total overhead costs Linear approximation Actual minus linear approximation €340,000 357,000 €(17,000) €400,000 400,000 € 0 €435,000 443,000 € (8,000) €477,000 486,000 € (9,000) €529,000 529,000 € 0 €587,000 572,000 € 5,000 Professional labour-hours 3,000 000 4,000 5,000 0000 6,000 0000 7,000 0000 8,000 The data are shown in Solution Exhibit 9.15. The linear cost function overstates costs by €8,000 at the hour level and understates costs by €15,000 at the hour level.
Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5 th Edition, Instructor’s Manual © Pearson Education Limited 2012 3Based on Based on linear Actual Cost function Contribution before deducting incremental overhead €38,000 €38,000 Incremental overhead 35,000 43,000 Contribution after incremental overhead € 3,000 €(5,000) Share with your friends: |