Fol variable and fixed costs!) w Method of cost analysis estimate a cost formula for maintenance What total factory overhead costs would you expect the company to incur an operating level of 70,00 D Labour-hours? cur at an operating level of 70,000 direct PROBLEM 6-7 Applying the Hic ving the High-Low Method and Predicting Cost (LO2-CC9] Company's total overhead costs at various levels of activity follow: CHECK FIGURE (2) $9,000 per month plus $1.60 per machine-hour Month Machine Hours Total Overhead Costs April 70.000 $198.000 May 60,000 174,000 June 80,000 222,000 246,000 July 90,000 Assume that the total overhead costs consist of utilities, supervisory salaries, and maintenance. The breakdown these costs at the 60,000 machine-hour level of activity is as follows: $ 48,000 Utilities (V) 21,000 Supervisory salaries (F) 105.000 Maintenance (M) $174,000 Total overhead costs V = variable; F = fixed; M = mixed. Nova Company's management wants to break down the maintenance cost into its basic variable and fixe elements. TER 6: COST BEHAVIOUR: ANALYSIS AND USE ch of this consiste Required: 1. As shown, overhead costs in July amounted to $246,000. Determine how much of this maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $246.000.com of utilities and supervisory salaries. Think about the behaviour of variable and fixed costs!) 2. By means of the high-low method, estimate a cost formula for maintenance. 3. Express the company's total overhead costs in the linear equation form Y = a + bX. 4. What total overhead costs would you expect to be incurred at an operating activity level of 7510 machine-hours? ROBLEM 6-8 plying the High-Low Method; Cost of Goods Manufactured [LO2-CC9; CHAPTE 06 - CC12]