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Nova Companys total overhead cost at various levels of activity are presented below: Month April May June July Machine- Hour

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Answer #1
Utilities cost per machine hour = Total utilities cost at 41000 machine hour level of activity / 41000 = 53300 / 41000 1.30
Required 1 :
July
Total overhead cost 258840
(-) Utilities cost ( 71000 * 1.30 ) 92300
(-) Supervisory salaries 63000
Maintenance cost 103540
Required 2 :
Machine hours Maintenance cost
High level of activity (July) 71000 103540
(-) Low level of activity (May) 41000 66340
Difference 30000 37200
Variable maintenance cost per machine hour = Difference in maintenance cost / Difference in Machine hours = 37200 / 30000 1.24
Now let us calculate the fixed maintenance cost using the information of high level of activity
Total maintenance cost = ( Machine hours * Variable maintenance cost per machine hours ) + Fixed maintenance cost
103540 = ( 71000 * 1.24 ) + Fixed maintenance cost
103540 = 88040 + Fixed maintenance cost
Fixed maintenance cost = 103540 - 88040 15500
Cost formula for maintenance :
Y = 15500 + 1.24 X
Required 3 :
Cost formula for total overhead :
Y = ( 15500 + 63000 ) + ( 1.24 + 1.30 ) X
Y = 78500 + 2.54X
Required 4 :
Let us calculate the Total overhead cost at an an activity level of 46000 machine hours using the cost formula derived in requirement 3 :
Y = 78500 + 2.54 * ( 46000 ) 195340
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