Reference no: EM132502025

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

Month Machine-Hours Total

Overhead Cost

April 45,000 $165,300

May 35,000 $142,700

June 55,000 $187,900

July 65,000 $210,500

Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 35,000 machine-hour level of activity is:

Utilities (variable)$38,500

Supervisory salaries (fixed) 50,000

Maintenance (mixed) 54,200

Total overhead cost$142,700

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

Required:

Question 1. Estimate how much of the $210,500 of overhead cost in July was maintenance cost. ( it may be helpful to first determine how much of the $210,500 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs.)

Question 2. Using the high-low method, estimate a cost formula for maintenance in the form Y = a + bX.

Question 3. Express the company's total overhead cost in the form Y = a + bX.

Question 4. What total overhead cost would you expect to be incurred at an activity level of 40,000 machine-hours?