The following income statements are provided for Li Company’s last two years of operation

| February 25, 2017

Question
The following income statements are provided for Li Company’s last two years of operation:

2012 2013
Number of units produced and sold 4,100 3,700
Sales revenue $69,700 $62,900
Cost of goods sold 55,300 49,960
Gross margin 14,400 12,940
General, selling and administrative expenses 12,620 11,740
Net income $1,780 $1,200

Assuming that cost behavior did not change over the two year period, what is the annual amount of the company’s fixed manufacturing overhead?

Best answer

rocky4ever.transtutors.com/Transtutors004/Images/Transtutors004_b0c15c81-0ea1-4660-927f-205c7adb2d98.jpeg”>rocky4ever answered this 2 hours later

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6,294 answers Ac€?c 59% Best Answer

Using High Low Method

Variable manufacturing Overhead cost per unit = (55300-49960)/(4100-3700)

Variable manufacturing Overhead cost per unit = $ 13.35

The annual amount of the company’s fixed manufacturing overhead = 55300-13.35*4100

The annual amount of the company’s fixed manufacturing overhead = $ 565

Answer

The annual amount of the company’s fixed manufacturing overhead = $ 565

I don’t understand how they came up with $565. Can you please break it down for me?

Thank you

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