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

Month Machine-Hours Total Overhead Cost

April 51,000 $ 202,940

May 41,000 $ 175,540

June 61,000 $ 230,340

July 71,000 $ 257,740

Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 41,000 machine-hour level of activity is:

Utilities (variable) $ 61,500

Supervisory salaries (fixed) 45,000

Maintenance (mixed) 69,040

Total overhead cost $ 175,540

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

Required:

1. Estimate how much of the $257,740 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $257,740 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 46,000 machine-hours?