Question
Martha Company's total overhead cost at various levels of activity are presented below: Month January February Machine Hours Total Overhead Costs 70,000 90,000 191,000 245,000
Martha Company's total overhead cost at various levels of activity are presented below: Month January February Machine Hours Total Overhead Costs 70,000 90,000 191,000 245,000 Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 70,000 machine-hour level of activity is: Utilities (Variable) Tk. 42,000 Supervisory salaries (Fixed) Tk. 46,000 Tk. 103,000 Tk. 191,000 Maintenance (Mixed) Total Overhead Costs Martha Company's management wants to break down the maintenance cost into its variable and fixed cost elements. Required: i. Estimate how much of the Tk.245,000 of overhead cost in February was maintenance cost. ii. Estimate a cost formula for maintenance. iii. Express the company's total overhead cost in the linear equation form. iv. What total overhead cost would you expect to be incurred at an activity level of 85,000 machine-hours
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