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 46,000 36,000 56,000 66,000 Total Overhead Cost $ 189,400 $ 164,400 $ 214,400 $ 239, 400 Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 36,000 machine-hour level of activity is: Utilities (variable) Supervisory salaries (fixed) Maintenance (mixed) Total overhead cost $ 50,400 59,000 55,000 $164,400 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 $239,400 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $239,400 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 41,000 machine-hours? Check my work 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 $239,400 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $239,400 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 41,000 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 $239,400 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $239,400 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 > Required: 1. Estimate how much of the $239,400 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $239,400 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 41,000 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= x Required: 1. Estimate how much of the $239,400 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $239,400 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 41,000 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 41,000 machine-hours? (Do not round intermediate calculations.) Total overhead costs
