Question
Harvest Companys total overhead cost at various levels of activity are presented below: Month Machine-Hours Total Overhead Cost March 53,000 $ 190,500 April 43,000 $
Harvest Companys total overhead cost at various levels of activity are presented below: Month Machine-Hours Total Overhead Cost March 53,000 $ 190,500 April 43,000 $ 166,500 May 63,000 $ 214,500 June 73,000 $ 238,500 Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 43,000 machine-hour level of activity is as follows: Utilities (variable) $ 51,600 Supervisory salaries (fixed) 49,000 Maintenance (mixed) 65,900 Total overhead cost $ 166,500 The company wants to break down the maintenance cost into its variable and fixed cost elements. Estimate how much of the $238,500 of overhead cost in June was maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $238,500 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs within the relevant range.) (Do not round intermediate calculations.) Maintenance cost in June: ? 2. Using the high-low method, estimate a cost formula for maintenance. (Round the "Variable cost per unit" to 2 decimal places.) Y = + X Express the companys total overhead cost in the form Y = a + bX. (Round the "Variable cost per unit" to 2 decimal places.) Y = + X What total overhead cost would you expect to be incurred at an activity level of 48,000 machine-hours? (Do not round intermediate calculations.) Total overhead cost: ?
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