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Nova Company s total overhead cost at various levels of activity are presented below: Month Machine - Hours Total Overhead Cost April 5 3 ,
Nova Companys total overhead cost at various levels of activity are presented below:
Month MachineHours Total Overhead Cost
April $
May $
June $
July $
Assume the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the machinehour level of activity is:
Utilities variable $
Supervisory salaries fixed
Maintenance mixed
Total overhead cost $
Nova Companys management wants to break down the maintenance cost into its variable and fixed cost elements.
Required:
Estimate how much of the $ of overhead cost in July was maintenance cost. Hint: To do this, it may be helpful to first determine how much of the $ consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs.
Using the highlow method, estimate a cost formula for maintenance in the form Y a bX
Express the companys total overhead cost in the form Y a bX
Estimate how much of the $ of overhead cost in July was maintenance cost. Hint: to do this, it may be helpful to first determine how much of the $ consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs.
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