46 PROBLEM 5A-8 High-Low Method; Predicting Cost LO5-10 Nova Company's total overhead cost at various levels of activity are presented below: Month April. May June. July Total Hours Machine- Overhead Cost 70,000 $198,000 60,000 $174,000 80,000 $222,000 90,000 $246,000 Assume that the total overhead cost above consists of utilities, supervisory salaries, and main- tenance. The breakdown of these costs at the 60,000 machine-hour level of activity is: Utilities (variable).. Supervisory salaries (fixed) Maintenance (mixed).. Total overhead cost.. $ 48,000 21,000 105,000 $174,000 Nova Company's management wants to break down the maintenance cost into its variable and fixed cost elements. Chapter 5 Required: 1. Estimate how much of the $246,000 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $246,000 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. Express the company's total overhead cost in the form Y = a + bx. 34 3. 4. What total overhead cost would you expect to be incurred at an activity level of 75,000 machine-hours