Assume that the total overhead cost above consists of

Reference no: EM13604725

Nova Company's total overhead cost at various levels of activity are presented below:

Month Machine Hours Overhead Cost
April 45,000 $ 167,500
May 36,000 $ 145,180
June 54,000 $ 189,820
July 63,000 $ 212,140

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) $ 46,800
Supervisory salaries (fixed) 43,000
Maintenance (mixed) 55,380

Total overhead cost $ 145,180

Nova Company's management wants to break down the maintenance cost into its variable and fixed cost elements.

Requirement 1:
Estimate how much of the $212,140 of overhead cost in July was maintenance cost.

Requirement 2:
Using the high-low method, estimate a cost formula for maintenance.

Requirement 3:
Express the company's total overhead cost in the linear equation form Y = a +bX.

Requirement 4:
What total overhead cost would you expect to be incurred at an operating activity level of 39,600 machine-hours?

Reference no: EM13604725

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