HighLow Method; Predicting Cost

Prince Companys total overhead costs at various levels of activity are presented below:

Assume that the overhead cost above consists of utilities, supervisory salaries, depreciation, and maintenance. The breakdown of these costs at the 80,000-machine-hour level of activity in October is as follows:

The company wants to break down the maintenance cost into its variable and fixed cost elements.

Required:

Estimate how much of the $483,200 of overhead cost in December was maintenance cost. (Hint: To do this, first determine how much of the $483,200 consisted of utilities and supervisory salaries. Think about the behaviour of variable and fixed costs within the relevant range.)

Using the highlow method, estimate a cost formula for maintenance.

Express the companys total overhead cost in the form Y = a + bX.

What total overhead cost would you expect to be incurred at an activity level of 90,000 machine-hours?

Total Machine- Overhead Month Cost Hours 0,000 80,000 135,000 40,000 $388000 $340400 $485,600 $483,200 September October December