Reference no: EM132675513

The Wildcat Company has provided the following information for the factory overhead cost pool:

Units of Output

                         30,000 Units            42,000 Units

Indirect materials $180,000                     $252,000

Indirect labour       1,080,000              1,512,000

Supervisors' salaries 312,000                   312,000

Equipment depreciation 151,200               151,200

Maintenance                  81,600                 110,400

Utilities                       384,000                  528,000

Total                      $2,188,800              $2,865,600

Required:

Using the high-low method and the information provided above,

Problem 1. identify the linear cost function equation and

Problem 2. estimate the total cost at 36,000 units of output.

Problem 3. Wildcat is now budgeting overhead costs of next year. It expects indirect material costs will increase by 6%, supervisor salaries will be 5% higher and that the variable portion of maintenance costs will increase by 4%. All other costs will remain at this year's level. What is the expected cost function for next year if the company expects to produce 40,000 units?