High-Low Method; Predicting Cost
Golden Company, total overhead cost at various levels of activity are presented below:
Month | Machine-Hours | Total Overhead Cost |
March | 50,000 | $194,000 |
April | 40,000 | $170,000 |
May | 60,000 | $217,800 |
June | 70,000 | $241,600 |
Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 40,000 machine-hour level of activity is as follows:
Utilities(Variable) | $ 52,000 |
Supervisory Salaries (fixed) | 60,000 |
Maintenance (mixed) | 58,200 |
Total overhead cost | $170,200 |
The company wants to break down the maintenance cost into its variable and fixed cost elements.
Required:
1. Estimate how much of the $241,600 of overhead cost in June was maintenance cost. (Hint: To do this. it may be helpful to first determine how much of the $241,600 consisted of utilities and supervisory salaries. Think about the behavior 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 + bK
4. What total overhead cost would you expect to be incurred at an activity level of 45.000 machine-hours?
We need at least 10 more requests to produce the solution.
0 / 10 have requested this problem solution
The more requests, the faster the answer.