Question
ces Problem 5A-8 (Algo) High-Low Method; Predicting Cost [LO5-10] Nova Company's total overhead cost at various levels of activity are presented below: Total Overhead
ces Problem 5A-8 (Algo) High-Low Method; Predicting Cost [LO5-10] Nova Company's total overhead cost at various levels of activity are presented below: Total Overhead Cost Month April May June July Machine-Hours 52,000 $ 199,720 42,000 $ 175,120 62,000 $224,320 72,000 $ 248,920 Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 42,000 machine-hour level of activity is: Utilities (variable) Supervisory salaries (fixed) Maintenance (mixed) Total overhead cost $ 58,800 59,000 57,320 $ 175,120 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 $248,920 of overhead cost in July was maintenance cost. (Hint to do this, it may be helpful to first determine how much of the $248,920 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 47,000 machine-hours? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Estimate how much of the $248,920 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $248,920 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs.) (Do not round intermediate calculations.) Maintenance cost in July $ 207.120
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