Check my work Total Machine- Overhead nth April Hay June July Hours Cost 45,000

Question

Check my work Total Machine- Overhead nth April Hay June July Hours Cost 45,000 174,750 35,000 151,250 55,000198,250 65,000 221,750 Assume that the total overhead cost above consists of utilities, superviso at the 35,000 machine-hour level of activity is: ry salaries, and maintenance. The breakdown of these costs Utilities (variable) Supervisory salaries (fixed) Maintenance (mixed) Total overhead cost $ 42,000 55,000 54,250 151,250 management wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the $221.750 of overhead cost in July was maintenance cost. (Hint to do this, it may be helpful to first determine how much of the $221,750 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs.) 2. Using the high-low method, estimate a cost formula for maintenance in the form Y -a +bX 3. Express the company's total overhead cost in the form Ya + bX 4. What total overhead cost would you expect to be incurred at an activity level of 40,000 machine-hours?

Explanation / Answer

1) Utilities (42000/35000)*65000 78000 Supervisory Salaries 55,000 Maintenance (balancing figure) 88,750 Total overhead cost 221,750 2) Estimating formula for maintenance cot MH's cost high 65,000 88,750 low -35,000 -54,250 Difference 30,000 34,500 Variable cost per unit = 34500/30000 1.15 Fixed cost = 88750 - 65000*1.15 14000 Cost formula Y= 14,000 + 1.15 X 3) Companys total overhead cost Variable Fixed Utilities 1.2 Supervisory salaries 55,000 Maintenance cost 1.15 14,000 total 2.35 69000 cost formula Y= 69,000 + 2.35 X 4) total overhead cost Y= 69,000 + 2.35 X so fixed cost 69,000 Variable cost (40000*2.35) 94000 total overhead cost 163,000 answer

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