Questions:
Golden Company's total overhead cost at various levels of activity are presented below:
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.
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 45,000machine-hours