Managerial Accounting: Chapter 6: Cost-Volume-Profit Relationships

Nova Company's total overhead cost at various levels of activity are presented below. Month April May June July Machine- Hours 46,000 36,000 56,000 66,000 Total Overhead Cost 6191, 960 166.360 217,560 243,160 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 U tes variable) Supervisory salaries (fixed) Maintenance mixed) Total overhead cost $50, 400 62,000 53, 960 5166, 360 Nova Company's management wants to break down the maintenance cost into its variable and fixed cost elements Required: 1. Estimate how much of the $243,160 of overhead cost in July was maintenance cost. (Hint to do this, it may be helpful to first determine how much of the $243,160 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs.) 2. Using the high-low method, estimate a cost formula for maintenance in the form Y a+bX 3. Express the company's total overhead cost in the form Y = a + bx 4. What total overhead cost would you expect to be incurred at an activity level of 41,000 machine-hours? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Estimate how much of the $243,160 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $243,160 consisted of utilities and supervisory salaries. Think about the behavior of variable and faced costs.) (Do not round intermediate calculations.) Maintenance cost in July Required 2 >