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Crosshill Companys total overhead costs at various levels of activity are presented below: Month Machine-Hours Total Overhead Cost April 70,000 $ 204,000 May 60,000 $

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

Month Machine-Hours Total Overhead Cost
April 70,000 $ 204,000
May 60,000 $ 183,000
June 80,000 $ 225,000
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) $ 54,000
Supervisory salaries (fixed) 21,000
Maintenance (mixed) 108,000
Total overhead cost $ 183,000

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.)

2. Using the highlow method, estimate a cost formula for maintenance. (Round the "Variable cost per unit" to 2 decimal places.)

Machine Hours Maintenance Cost
High activity
Low activity
Change
Variable cost element per MH
Fixed cost element

Y= X=

3. Express the companys total overhead cost in the form Y = a + bX. (Round the "Variable cost per unit" to 2 decimal places.)

Variable cost per MH Fixed Cost
Utilities cost
Supervisory salaries cost
Maintenance cost
Total overhead cost
Y= X=

4. What total overhead cost would you expect to be incurred at an activity level of 75,000 machine-hours? (Round the "Variable cost per unit" to 2 decimal places.

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