Nova Companys total overhead cost at various levels of activity are presented below: Month Machine-...
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Nova Companys total overhead cost at various levels of activity are presented below: Month Machine- Hours Total Overhead Cost April 54,000 $ 201,020 May 44,000 $ 176,720 June 64,000 $ 225,320 July 74,000 $ 249,620 Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 44,000 machine-hour level of activity is: Utilities (variable) $ 57,200 Supervisory salaries (fixed) 57,000 Maintenance (mixed) 62,520 Total overhead cost $ 176,720 Nova Companys management wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the $249,620 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $249,620 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs.) 2. Using the high-low method, estimate a cost formula for maintenance in the form Y = a + bX. 3. Express the companys total overhead cost in the form Y = a + bX. 4. What total overhead cost would you expect to be incurred at an activity level of 49,000 machine-hours?
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