Nova company\'s total overhead cost at various levels of activity are presented

Question

Nova company's total overhead cost at various levels of activity are presented below: Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 41,000 machine-hour level of activity is: Nova company's management wants to break down the maintenance cost into its variable and fixed cost elements: Required: Estimate how much of the $274,530 of overhead cost in july was maintenance cost (Do not round intermediate calculations.)

Explanation / Answer

Utilities cost per hour = $57,400/41,000 hours = $1.40 per hour

Highest level of machine hours = 71,000 and lowest level = 41,000

Thus maintenace cost in July = 274,530 - 99,400-69,000

= $106,130

41000 Mhs 71000 Mhs Total overhead cost 195,630.00 274,530.00 less: Utilities cost@ 1.4 per hr 57,400.00 99,400.00 Supervisors salary 69,000.00 69,000.00 Maintenance cost (balancing figure) 69,230.00 106,130.00

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