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Nova Company's total overhead costs at various levels of activity follow: Month April May June July Machine- Hours 79,500 118,500 99,000 109,000 Total Overhead Costs
Nova Company's total overhead costs at various levels of activity follow: Month April May June July Machine- Hours 79,500 118,500 99,000 109,000 Total Overhead Costs $ 217,000 289,000 241,000 246, 190 Assume that the total overhead costs consist of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 79,500 machine-hour level of activity is as follows: Utilities (V) Supervisory salaries (F) Maintenance (1) Total overhead costs $ 48, 190 22, 900 145, 910 $ 217,000 V = variable; F = fixed; M = mixed. Nova Company's 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 $289,000. Determine how much of this consisted of maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $289,000 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.) Maintenance cost 2. By means of the high-low 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.) x 3. Express the company's total overhead costs in the linear equation form Y = a + bx. (Do not round intermediate calculations. Round "Fixed cost" answer to the nearest whole dollar and "Variable cost" answer to 2 decimal places.) 4. What total overhead costs would you expect to be incurred at an operating activity level of 79,000 machine-hours? At an operating activity level of 94,000 machine-hours? (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) Total Overhead Cost 79,000 machine-hours 94,000 machine-hours
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