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Crosshill Companys total overhead costs at various levels of activity are presented below: Month Machine-Hours Total Overhead Cost April 57,000 $ 119,000 May 47,000 $

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

Month Machine-Hours Total Overhead Cost

April 57,000 $ 119,000

May 47,000 $ 149,000

June 67,000 $ 339,000

July 78,000 $ 177,000

Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 47,000-machine-hour level of activity in May is as follows:

Utilities (variable) $ 22,000

Supervisory salaries (fixed) 24,000

Maintenance (mixed) 103,000

Total overhead cost $ 149,000

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

Required:

1. Estimate how much of the $177,000 of overhead cost in July was maintenance cost. (Hint: To do this, first determine how much of the $177,000 consisted of utilities and supervisory salaries. Think about the behaviour of variable and fixed costs within the relevant range.

Maintenance cost in July:....................

2. Using the highlow method, estimate a cost formula for maintenance

High activity level

Low activity level

Change

Variable cost element:

fixed cost element

Y.....+......X

3. Express the companys 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 62,000 machine-hours?

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