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

Month	Machine-Hours	Total Overhead Cost
April	54,000	$208,340
May	44,000	$184,240
June	64,000	$232,440
July	74,000	$256,540

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)	$	57,200
Supervisory salaries (fixed)		61,000
Maintenance (mixed)		66,040
Total overhead cost	$	184,240

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

Required:

1.

Estimate how much of the $256,540 of overhead cost in July was maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $256,540 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. (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
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

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