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Diamond Company's total overhead costs at various levels of activity are presented below: Machine hours Total overhead costs March 60,000 $216,800 April 50,000 194,000 May

Diamond Company's total overhead costs at various levels of activity are presented below:

Machine hours

Total overhead costs

March

60,000

$216,800

April

50,000

194,000

May

70,000

239,600

June

80,000

262,400

Assume that the overhead costs above consist of utilities, supervisory salaries, and maintenance. At the 50,000-machine-hour level of activity, these costs are presented below:

Utilities (V)

$54,000

Supervisory salaries (F)

62,000

Maintenance (M)

78,000

Total overhead costs

$194,000

V = Variable, F = Fixed, M = Mixed The company wants to break down the maintenance cost into its basic variable and fixed cost elements.

Required:

  1. Estimate the maintenance cost for June.
  2. Use the high-low method to estimate the cost formula for maintenance cost.
  3. Estimate the total overhead cost at an activity level of 55,000 machine hours, using the separate estimates you obtained for its components.

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