Reference no: EM133001160
A company's total overhead cost at various levels of activity are presented below:
Month Machine hours Total Overhead Cost
April 76000 158000
May 66000 150000
June 86000 363000
July 95000 202000
Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 66000-machine-hour-level of activity in May as below:
Utilities (variable): 39000
Supervisory salaries: 22000
Maintenance (fixed): 89000
Total overhead cost: 150000
The company wants to break down the maintenance cost into its variable and fixed cost elements.
Required:
Problem 1. Estimate how much of the $202,000 of overhead cost in July was maintenance cost. To do this, first determine how much of the $202,000 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs within the relevant range.) (Round the "Variable cost per unit" to 2 decimal places.)
Problem 2. Using the high-low method, estimate a cost formula for maintenance.
Problem 3. Express the company's total overhead cost in the form Y= a + bX
Problem 4. What total overhead cost would you expect to be incurred at an activity level of 81000 machine-hour?
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