Problem 6A-8 High-Low Method; Predicting Cost [LO6-10] Nova Company's total overhead cost at various levels of activity are presented below: Month April May June July Machine- Hours 52,000 42,000 62,000 72,000 Total Overhead Cost $ 189,320 $ 167,720 $ 210,920 $ 232,520 Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 42,000 machine-hour level of activity is: Utilities (variable) Supervisory salaries (fixed) Maintenance (mixed) Total overhead cost $ 46,200 58,000 63,520 $167,720 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 $232,520 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $232,520 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 company's 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 47,000 machine-hours? Complete this question by entering your answers in the tabs below. 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 $232,520 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $232,520 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 company's 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 47,000 machine-hours? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Estimate how much of the $232,520 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $232,520 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs.) (Do not round intermediate calculations.) Maintenance cost in July 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 $232,520 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $232,520 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 company's 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 47,000 machine-hours? 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 = a + bx. (Do not round your intermediate calculations. Round the "Variable cost per unit" to 2 decimal places.) Y = costs.) 2. Using the high-low method, estimate a cost formula for maintenance in the form Y = a +bX. 3. Express the company's 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 47,000 machine-hours? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 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 Fixed Cost Hour Utilities cost Supervisory salaries cost Maintenance cost Total overhead cost $ 0.00 $ 0 Y = X 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 $232,520 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $232,520 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 company's 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 47,000 machine-hours? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 What total overhead cost would you expect to be incurred at an activity level of 47,000 machine-hours? (Do not round intermediate calculations.) Total overhead costs
