Problem 3-15 High-Low Method; Predicting Cost (LO1, LO2] Crosshill Company's total overhead costs at various levels of activity are presented below: Month April May June July Machine Hours 49,000 39.000 59,000 69,000 Total Overhead Cost $196,990 $169,890 $224,090 $251,190 Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 39,000-machine-hour level of activity in May is as follows: Utilities (variable) Supervisory salaries (fixed) Maintenance (mixed) $58,500 47,000 64,390 Total overhead cost $ 169,890 The company wants to break down the maintenance cost into its variable and fixed cost elements. Problem 3-15 High-Low Method; Predicting Cost (LO1, LO2] Crosshill Company's total overhead costs at various levels of activity are presented below: Month April May June July Machine Hours 49,000 39,000 59,000 69,000 Total Overhead Cost $196,990 $169,890 $224,090 $251,190 Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 39,000-machine-hour level of activity in May is as follows: Utilities (variable) Supervisory salaries (fixed) Maintenance (mixed) $58,500 47,000 64,390 Total overhead cost $ 169,890 The company wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the $251,190 of overhead cost in July was maintenance cost. (Hint: To do this, first determine how much of the $251,190 consisted of utilities and supervisory salaries. Think about the behaviour of variable and fixed costs within the relevant range.) (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 per MH Variable cost element Fixed cost element + Y= 3. Express the company's 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.) sok int Variable Cost per Machine-Hour Fixed Cost ences Utilities cost Supervisory salaries cost Maintenance cost Total overhead cost 4. What total overhead cost would you expect to be incurred at an ac 44,000 machine-hours? (Do not round intermediate calculations.) Total overhead cost 4. What total overhead cost would you expect to be incurred at an activity level of 44,000 machine-hours? (Do not round intermediate calculations.) Total Overhead cost
