Question
Nova Companys total overhead costs at various levels of activity follow: Month Machine-Hours Total Overhead Costs April 75,500 $ 209,000 May 110,500 281,000 June 91,000
Nova Companys total overhead costs at various levels of activity follow: Month Machine-Hours Total Overhead Costs April 75,500 $ 209,000 May 110,500 281,000 June 91,000 233,000 July 101,000 246,990 Assume that the total overhead costs consist of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 75,500 machine-hour level of activity is as follows: Utilities (V) $ 48,990 Supervisory salaries (F) 22,100 Maintenance (M) 137,910 Total overhead costs $ 209,000 V = variable; F = fixed; M = mixed. Nova Companys management wants to break the maintenance cost down into its basic variable and fixed cost elements. Required: 1. As shown, overhead costs in May amounted to $281,000. Determine how much of this consisted of maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $281,000 consisted of utilities and supervisory salaries. Think about the behaviour of variable and fixed costs!) (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) 2. By means of the highlow method, estimate a cost formula for maintenance. (Do not round intermediate calculations. Round "Fixed cost" answer to the nearest whole dollar and "Variable cost" answer to 2 decimal places.)
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