Question
Dwomoa Group of Companies total overhead cost at various levels of activity are presented below: Month Machine-Hours Total Overhead Cost April 52,000 $224,760 May 42,000
Dwomoa Group of Companies total overhead cost at various levels of activity are presented below: Month Machine-Hours Total Overhead Cost April 52,000 $224,760 May 42,000 $198,460 June 62,000 $251,060 July 72,000 $277,360 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) $ 58,800 Supervisory salaries (fixed) 70,000 Maintenance (mixed) 69,660 Total overhead cost $ 198,460 Dwomoa Group of Companies, management wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the $277,360 of overhead cost in July was maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $277,360 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs!) (Do not round intermediate calculations.) 2. Using the high-low method, estimate a cost formula for maintenance. (Do not round your intermediate calculations. Round the "Variable cost per unit" to 2 decimal places.)
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