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Nova Company's total overhead cost at various levels of activity are presented below: Month April May June July Machine- Hours 55,000 45,000 65,000 75,000 Total
Nova Company's total overhead cost at various levels of activity are presented below: Month April May June July Machine- Hours 55,000 45,000 65,000 75,000 Total Overhead Cost $ 201, 250 $ 177,550 $ 224,950 $ 248,650 Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 45,000 machine-hour level of activity is: Utilities (variable) Supervisory salaries (fixed) Maintenance (mixed) Total overhead cost $ 58,500 52,000 67,050 $177,550 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 $248,650 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $248,650 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 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 50,000 machine-hours
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