Crosshill Company's total overhead costs at various levels of activity are presented below: Assume that the overhead

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Crosshill Company's total overhead costs at various levels of activity are presented below:

Total Overhead Month Machine-Hours Cost April.... May . $198,000 $174,000 $222,000 $246,000 70,000 60,000 80,000 June Ju


Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 60,000-machine-hour level of activity in May is as follows:

Utilities (variable) ... Supervisory salaries (fixed)... Maintenance (mixed)... $ 48,000 21,000 105,000 $174,000 Total o


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


Required:

1. Estimate how much of the $246,000 of overhead cost in July was maintenance cost. To do this, first determine how much of the $246,000 consisted of utilities and supervisory salaries. Think about the behaviour of variable and fixed costs within the relevant range.

2. Using the high-low method, estimate a cost formula for maintenance.

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 75,000 machine hours?

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Related Book For  book-img-for-question

Managerial Accounting

ISBN: 9781259275814

11th Canadian Edition

Authors: Ray H Garrison, Alan Webb, Theresa Libby

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