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Problem 5A-8 High-Low Method; Predicting Cost [LOS-10) Nova Company's total overhead cost at various levels of activity are presented below: Month April May June July

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Problem 5A-8 High-Low Method; Predicting Cost [LOS-10) Nova Company's total overhead cost at various levels of activity are presented below: Month April May June July Machine- Hour 47,000 37,000 57.000 67,000 Total Overhead Cout $ 183, 490 5.159.790 5 207,199 $ 230,890 Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 37,000 machine-hour level of activity is: Utilities variable) Supervisory salaries (fixed) Maintenance mixed) Total overhead cost $ 44,400 59,000 56,390 $159,790 Nova Company's management wants to break down the maintenance cost into its variable and fixed cost elements Required: 1. Estimate how much of the $230,890 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $230,890 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 Ya+bX 3. Express the company's total overhead cost in the form y=+bX 4. What total overhead cost would you expect to be incurred at an activity level of 42,000 machine-hours? Required 1 Required 2 Required 3 Required 4 Estimate how much of the $230,890 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $230,890 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs.) (Do not round intermediate calculations.) Maintenance cost in July Required 1 Required 2 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Using the high-low method, estimate a cost formula for maintenance in the form Y-3 + bx. (Do not round your intermediate calculations. Round the "Variable cost per unit to 2 decimal places.) 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.) Variable Cost per Machine Hour Fixed Cost Utilities cost Supervisory salaries cost Maintenance cost Total overhead cost Required 1 Required 2 Required 3 Required 4 What total overhead cost would you expect to be incurred at an activity level of 42,000 machine-hours? (Do not round intermediate calculations.) Total overhead cost

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