Given the Following Cost and Activity Observations for Smithson Company's

question 120

Multiple Choice

Given the following cost and activity observations for Smithson Company's utilities, use the high­low method to calculate Smithson's fixed costs per month. Do not round your intermediate calculations.

• A) $1,533
• B) $2,530
• C) $22,800
• D) $50,600

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Definitions:

Machine-Hours

A measure of the amount of time machines are operated, used as a basis for allocating manufacturing overhead costs in some costing systems.

Predetermined Overhead Rate

A rate used to allocate overhead costs to products or services, calculated based on estimated overhead and activity levels before the period begins.

Direct Labor-Hour

A measure of the labor time directly involved in the production of goods, usually quantified in hours.

Overhead Applied

The process of allocating overhead costs to specific jobs or products based on a pre-determined rate or method.