Question
Problem1 .High-Low Analysis and Predicting Cost Prospero Corporation's total overhead costs at various levels of activity are presented below: Total Machine Overhead Month -Hours
Problem1 .High-Low Analysis and Predicting Cost Prospero Corporation's total overhead costs at various levels of activity are presented below: Total Machine Overhead Month -Hours Costs August... 8,000 $119,400 September 12,000 $142,800 October. 16,000 $166,200 November 4,000 $93,120 Assume that the total overhead costs above consist of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 4,000 machine-hour level of activity is: Utilities (variable)... $11,520 Supervisory (fixed)......... salaries 15,600 66,000 $93,120 Maintenance (mixed).... Total overhead costs..... Prospero Corporation's management wants to break down the maintenance cost into its basic variable and fixed cost elements. Required: (1). Estimate how much of the $166,200 of overhead cost in October was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $166,200 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. (3).Express the company's total overhead costs in the linear equation form Y = a + bX. (4). What total overhead costs would you expect to be incurred at an operating activity level of 15,000 machine-hours?
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