Nova Companys total overhead cost at various levels of activity are presented below: MonthMachine-HoursTotalOverheadCostApril 55,000 $222,350May 45,000
Question:
Nova Companys total overhead cost at various levels of activity are presented below: MonthMachine-HoursTotalOverheadCostApril 55,000 $222,350May 45,000 $195,250June 65,000 $249,450July 75,000 $276,550 Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 45,000 machine-hour level of activity is: Utilities (variable)$67,500Supervisory salaries (fixed) 60,000Maintenance (mixed) 67,750Total overhead cost$195,250 Nova Companys management wants to break down the maintenance cost into its variable and fixed cost elements. Required:1. Estimate how much of the $276,550 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $276,550 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 50,000 machine-hours?
Managerial Accounting
ISBN: 9780073526706
12th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer