Nova Companys total overhead cost at various levels of activity are presented below:

Month	Machine-Hours	Total Overhead Cost
April	54,000	$ 192,700
May	44,000	$ 169,200
June	64,000	$ 216,200
July	74,000	$ 239,700

Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 44,000 machine-hour level of activity is:

Utilities (variable)	$ 48,400
Supervisory salaries (fixed)	46,000
Maintenance (mixed)	74,800
Total overhead cost	$ 169,200

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

Required:

1. Estimate how much of the $239,700 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $239,700 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 companys 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 49,000 machine-hours?

1-

Estimate how much of the $239,700 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $239,700 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs.) (Do not round intermediate calculations.)

Maintenance cost in July

• 2-

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

  Y =

  +

  X

• 3

  Express the companys total overhead cost in the 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 49,000 machine-hours? (Do not round intermediate calculations.)

  Total overhead cost