Nova Companys total overhead cost at various levels of activity are presented below: Month Machine-Hours Total Overhead Cost April 50,000 $181,700 May 40,000 $157,200 June 60,000 $206,200 July 70,000 $230,700

Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 40,000 machine-hour level of activity is: Utilities (variable) $ 48,000 Supervisory salaries (fixed) 45,000 Maintenance (mixed) 64,200 Total overhead cost $ 157,200

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

Required: 1. Estimate how much of the $230,700 of overhead cost in July was maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $230,700 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs!) (Do not round intermediate calculations.)

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

	Machine- Hours	Maintenance Cost
High activity level
Low activity level
Change	0	$0
Variable cost element		per MH
Fixed cost element

Y =

+

X

3. Express the companys total overhead cost in the linear equation form Y = a + bX. (Do not round your intermediate calculations. Round the "Variable cost per unit" to 2 decimal places.)

	Variable Cost per
	Machine-Hour	Fixed Cost
Utilities cost
Supervisory salaries cost
Maintenance cost
Total overhead cost	$0.00	$0

Y =

+

X

4. What total overhead cost would you expect to be incurred at an activity level of 45,000 machine-hours? (Do not round intermediate calculations.)