Question
A companys total overhead cost at various levels of activity is presented below: Month Machine-Hours Total Overhead Cost March ...................................... 2,000 $18,000 April ......................................... 5,000
A companys total overhead cost at various levels of activity is presented below:
Month | Machine-Hours | Total Overhead Cost |
March ...................................... | 2,000 | $18,000 |
April ......................................... | 5,000 | $28,500 |
May ......................................... | 6,000 | $32,000 |
June ........................................ | 4,000 | $25,000 |
Assume that the overhead cost above consists of direct materials, supervisory salaries, and utilities. The breakdown of these costs at the 6,000 machine-hour level of activity is as follows:
Direct Materials (variable) ............................. | $12,000 |
Supervisory salaries (fixed) ................... | ? |
Utilities (mixed) ..................................... | 12,000 |
Total overhead cost .............................. | ? |
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Suppose the company uses the high-low method to estimate a cost formula for utilities. What is the total utilities cost the company expects to incur at an activity level of 6,500 machine hours?
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