Nova Company's total overhead cost at various levels of activity are presented below: Total Machine-Overhead...
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Nova Company's total overhead cost at various levels of activity are presented below: Total Machine-Overhead Month April May une July Hours 46,000 36,000 147,360 56,000 66,000 219,660 Cost $171,460 195,560 Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 36,000 machine-hour level of activity is: Utilities (variable) Supervisory salaries (fixed) Maintenance (mixed) Total overhead cost $46,800 45,000 55,560 $147,360 Nova Company's management wants to break down the maintenance cost into its variable and fixed cost elements Required: 1. Estimate how much of the $219,660 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $219,660 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 YFa bX. 3. Express the company's total overhead cost in the form Y a + bx. 4. What total overhead cost would you expect to be incurred at an activity level of 41,000 machine-hours
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