Nova Company\'s total overhead cost at various levels of activity are presented
ID: 2364143 • Letter: N
Question
Nova Company's total overhead cost at various levels of activity are presented below:
Month Machine- Hours Total Overhead Cost
April 52,500 $ 205,200
May 42,000 $ 180,000
June 63,000 $ 230,400
July 73,500 $ 255,600
Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 42,000 machine-hour level of activity is:
Utilities (variable) $ 54,600
Supervisory salaries (fixed) 64,000
Maintenance (mixed) 61,400
Total overhead cost $ 180,000
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 $255,600 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $255,600 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs!) (Omit the "$" sign in your response.)
Maintenance cost $
Requirement 2: Using the high-low method, estimate a cost formula for maintenance. (Round the variable portion of the formula to 2 decimal places. Omit the "$" sign in your response.)
Y = $ + $ X
Requirement 3: Express the company's total overhead cost in the linear equation form Y = a +bX. (Round the variable portion of the formula to 2 decimal places. Omit the "$" sign in your response.)
Y = $ + $ X
Requirement 4: What total overhead cost would you expect to be incurred at an operating activity level of 46,200 machine-hours? (Round your answer to the nearest dollar amount. Omit the "$" sign in your response.)
Total overhead costs $
Explanation / Answer
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