Black Ltd. operates buses for long distance travel in the United Kingdom.

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

TOTAL TOTAL OVERHEAD KM's MONTH COSTS DRIVEN

September $388,000 100,000

October $340,000 80,000

November $485,000 135,000

December $483,000 140,000

Assume that the total overhead cost consists of utilities, supervisory salaries and bus maintenance. The breakdown of these costs at the 80,000 KM October level is as follows:

Utilities (variable cost) $104,000

Salaries (fixed cost) $120,000

Maintenance (mixed cost) $116,000

Total October overhead cost $340,000

In January the company expects to incur 90,000 KM's of activity.

1. Calculate the Maintenance cost in each of the months September to December

2. For the month of January calculate the cost of: (i) Salaries (1 Mark) (ii) Utilities (2 Marks) (iii) Maintenance (use the least squares method using your calculator or MS Excel)

3 Using the information in the question and the items calculated above, prepare a formula Y = a + bX that represents the total overhead costs (comprising utilities, supervisory salaries and bus maintenance)

4. Explain briefly to the CEO of Black Ltd how the company might use their understanding of the above cost behaviours to control overhead costs in the future