Home Remodeling Inc. recently obtained a short-term bank loan from City National Bank. The bank required that certain credit information and pro forma financial statements be maintained through the life of the loan. In order to prepare the pro forma statements, Home Remodeling must forecast total overhead cost. The actual machine hours and overhead cost are presented below for the past six months.
Using the high-low method, unit variable overhead cost is calculated to be:
Definitions:
Average Number
The central value of a set of numbers, calculated by dividing the sum of all numbers by the count of those numbers.
System
A set of interconnected components that work together to achieve a particular goal or perform a specific function.
Little's Law
A principle in queueing theory stating that, under steady state conditions, the long-term average number of customers in a stationary system is equal to the long-term average effective arrival rate multiplied by the average time a customer spends in the system.
Average Number
The average number represents the central value or the arithmetic mean obtained by dividing the sum of a set of numbers by the count of numbers in the set.
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