Nova Company's total overhead cost at various levels of activity are presented below: Month: April Machine-...
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Nova Company's total overhead cost at various levels of activity are presented below: Month: April Machine- Hours Cost 50,000 $187,500 Total Overhead May 40,000 $163,800 June July 60,000 $211,200 70,000 $234,900 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) 50,000 65,800 $163,800 Maintenance (mixed) Total overhead cost 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 $234,900 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $234,900 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 Ya+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 15.000 machi Nova Company's total overhead cost at various levels of activity are presented below: Month: April Machine- Hours Cost 50,000 $187,500 Total Overhead May 40,000 $163,800 June July 60,000 $211,200 70,000 $234,900 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) 50,000 65,800 $163,800 Maintenance (mixed) Total overhead cost 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 $234,900 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $234,900 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 Ya+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 15.000 machi
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