Question - Nova Company's total overhead costs at various levels of activity are presented below:
Month Machine Hours Total Overhead Costs
April 70,000 $198,000
May 60,000 $174,000
June 80,000 $222,000
July 90,000 $246,000
Assume that the total overhead costs above consist of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 60,000 machine-hour level of activity is:
Utilities (variable) $48,000
Supervisory salaries (fixed) 21,000
Maintenance (mixed) 105,000
Total overhead costs $174,000
Required:
1. Estimate how much of the $246,000 of overhead cost in July was maintenance cost?
2. Using the high-low method, estimate a cost formula for maintenance
3. Express the company's total overhead costs in the linear equation form Y = a + bX.
4. What total overhead costs would you expect to be incurred at an operating level of 75,000 machine hours?