hw ch2.4

Nova Companys total overhead cost at various levels of activity are presented below:

Month	Machine- Hours		Total Overhead Cost
April	46,000		$	201,180
May	36,000		$	175,380
June	56,000		$	226,980
July	66,000		$	252,780

Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 36,000 machine-hour level of activity is:

Utilities (variable)	$	50,400
Supervisory salaries (fixed)		67,000
Maintenance (mixed)		57,980
Total overhead cost	$	175,380

Nova Companys management wants to break down the maintenance cost into its variable and fixed cost elements.

Required:

1. Estimate how much of the $252,780 of overhead cost in July was maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $252,780 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs!) (Do not round intermediate calculations.)

Maintenance cost in July=?

2. Using the high-low method, estimate a cost formula for maintenance. (Do not round your intermediate calculations. Round the "Variable cost per machine-hours" to 2 decimal places.)