Reference no: EM132837547
Question - Crosshill Company's total overhead costs at various levels of activity are presented below:
|
Month
|
Machine-Hours
|
Total Overhead Cost
|
|
April
|
45,000
|
$202,150
|
|
May
|
35,000
|
$176,450
|
|
June
|
55,000
|
$227,850
|
|
July
|
65,000
|
$253,550
|
Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 35,000-machine-hour level of activity in May is as follows:
Utilities (variable) $49,000
Supervisory salaries (fixed) 70,000
Maintenance (mixed) 57,450
Total overhead cost $176,450
The company wants to break down the maintenance cost into its variable and fixed cost elements.
Required -
1. Estimate how much of the $253,550 of overhead cost in July was maintenance cost.
2. Using the high-low method, estimate a cost formula for maintenance.
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 40,000 machine-hours?