Reference no: EM131768791

Question - Fahrenheit Co. manufactures a product that requires the use of a considerable amount of natural gas to heat it to a desired temperature. The process requires a constant level of heat, so the furnaces are maintained at a set temperature for 24 hours a day. Although units are not continuously processed, management desires that the variable cost be charged directly to the product and the fixed cost to the factory overhead. The following data has been collected for the year:

Month Units Cost

Jan 2,400 4,400

Feb 2,300 4,300

Mar 2,200 4,200

Apr 2,000 4,000

May 1,800 3,800

Jun 1,900 3,900

Jul 2,200 4,400

Aug 2,100 4,100

Sep 2,000 3,800

Oct 1,400 3,400

Nov 1,900 3,700

Dec 1,800 4,050

Total 24,000 $48,050

1. Separate the variable and fixed elements, using the high-low method.

2. Determine the cost to be charged to the product for the year.

3. Determine the cost to be charged to factory overhead for the year.