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.
Estimate how much of the $268,770 of overhead cost in July was maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $268,770 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs!) (Do not round intermediate calculations.)
Using the high-low method, estimate a cost formula for maintenance. (Do not round your intermediate calculations. Round the "Variable cost per unit" to 2 decimal places.)
Express the company’s total overhead cost in the linear equation form Y = a + bX. (Do not round your intermediate calculations. Round the "Variable cost per unit" to 2 decimal places.)
What total overhead cost would you expect to be incurred at an activity level of 46,000 machine-hours? (Do not round intermediate calculations.)
Nova Company’s total overhead cost at various levels of activity are presented below: