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PROBLEM 3-15 High-Low Method; Predicting Cost [LO1, LO2] Crosshill Company's total overhead costs at various levels of activity are presented below: Total Overhead Cost Month Machine Hours April. ..... May .......... June ........ July................... 70,000 60,000 80,000 90,000 $198,000 $174,000 $222,000 $246,000 Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 60,000-machine-hour level of activity in May is as follows: Utilities (variable) .......................... $ 48,000 Supervisory salaries (fixed)... 21,000 Maintenance (mixed).. .... 105,000 Total overhead cost .......... ............. $174,000 The company wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the $246,000 of overhead cost in July was maintenance cost. (Hint: To do this, first determine how much of the $246,000 consisted of utilities and supervisory salaries. Think about the behaviour of variable and fixed costs within the relevant range.) 2. Using the high-low method, estimate a cost formula for maintenance. 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 75,000 machine- hours

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