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

Month	Machine- Hours			Total Overhead Cost
April		54,000		$	197,500
May		44,000		$	172,000
June		64,000		$	223,000
July		74,000		$	248,500

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)	$	61,600
Supervisory salaries (fixed)		44,000
Maintenance (mixed)		66,400
Total overhead cost	$	172,000

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

Required:

1. Estimate how much of the $248,500 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $248,500 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?

• Required 1

1. Estimate how much of the $248,500 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $248,500 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs.) (Do not round intermediate calculations.)

Maintenance cost in July

$130,500

• Required 2

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

• Required 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

• Required 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 costs