Nova Company's total overhead cost at various levels of activity are presented below: Month April May...
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Nova Company's total overhead cost at various levels of activity are presented below: Month April May June July Machine- Hours 49,000 39,000 59,000 69,000 Total Overhead Cost $ 185,880 $ 159,680 $ 212,080 $ 238, 280 Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 39,000 machine-hour level of activity is: Utilities (variable) Supervisory salaries (fixed) Maintenance (mixed) Total overhead cost $ 58,500 44,000 57,180 $ 159, 680 Nova Company's management wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the $238,280 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $238,280 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 company's 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 44,000 machine-hours? Nova Company's total overhead cost at various levels of activity are presented below: Month April May June July Machine- Hours 49,000 39,000 59,000 69,000 Total Overhead Cost $ 185,880 $ 159,680 $ 212,080 $ 238, 280 Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 39,000 machine-hour level of activity is: Utilities (variable) Supervisory salaries (fixed) Maintenance (mixed) Total overhead cost $ 58,500 44,000 57,180 $ 159, 680 Nova Company's management wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the $238,280 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $238,280 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 company's 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 44,000 machine-hours?
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Answer Solution 1 May 39000 hours July 69000 hours Utilities variable 46800 828... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-1259307416
16th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer
Posted Date:
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