Question
Crosshill Company's total overhead costs at various levels of activity are presented below: Total Overhead Month Machine-Hours Cost April 70,000 $210,000 May 60,000 $178,200
Crosshill Company's total overhead costs at various levels of activity are presented below: Total Overhead Month Machine-Hours Cost April 70,000 $210,000 May 60,000 $178,200 June 80,000 $234,000 July 90,000 $246,000 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) Total overhead cost $ 48,600 21,000 108,600 $178,200 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. (Hint 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.) (Round the "Variable cost per unit" to 2 decimal places.) Maintenance cost in July 2. Using the high-low method, estimate a cost formula for maintenance. (Round the "Variable cost per unit" to 2 decimal places.) Machine- Hours Maintenance Cost High activity level Low activity level Change Variable cost element OS per MH Fixed cost element Y = X 3. Express the company's total overhead cost in the form Y= a + bx. (Round the "Variable cost per unit" to 2 decimal places.) Variable Cost per Machine- Fixed Cost
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