ABC Company's total overhead costs at various levels of activity are presented below:
Month Machine Hours Total Overhead Costs
March 60,000 $216,800
April 50,000 194,000
May 70,000 239,600
June 80,000 262,400
Assume that the overhead costs above consist of utilities, supervisory salaries, and maintenance. At the 50,000 machine-hour level of activity these costs are:
Utilities (V) $ 54,000
Supervisory salaries (F) 62,000
Maintenance (M) 78,000
Total overhead costs $194,000
V = Variable; F = Fixed; M = Mixed.
The company wants to break down the maintenance cost into its basic variable and fixed cost elements.
Required:
a.) Estimate the maintenance cost for June.
b.) Use the high-low method to estimate the cost formula for maintenance cost.
c.) Estimate the total overhead cost at an activity level of 55,000 machine hours.