Question

Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 35.000 machine-hour level of activity is: Utilities (variable) Supervisory salaries (fixed) Maintenance (mixed) Total overhead cost $ 45,500 54,000 60,850 $160, 350 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 $236,250 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $236.250 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 Y = a +bX 4. What total overhead cost would you expect to be incurred at an activity level of 40,000 machine-hours? Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Estimate how much of the $236,250 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $236,250 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs.) (Do not round intermediate calculations.) Maintenance cost in s 97.750 July

Answer 1

Ans.1. Out of Total Overhead Cost of $236,250 in July, Maintenance Cost = $236,250 - ($1.3 x 65,000) - $54,000 = $97,750

Ans.2. Fixed Maintenance Cost = $17,800 and Variable Maintenance Cost = $1.23 per machine hour

Therefore, Y = $17,800 + $1.23x

Ans.3. Total Fixed Overhead Cost = $71,800 and Total Variable Overhead Cost = $2.53 per machine hour

Therefore, Y = $71,800 + $2.53x

Ans.4.

At 40,000 Machine hour level

Particulars	Amt
Utilities (40,000 x $1.3 per machine hour)	$52,000
Supervisory Salary	$54,000
Maintenance [$17,800 + (40,000 x $1.23 per machine hour)]	$67,000
Total Overhead Cost	$173,000