Golden Company's total overhead cost at various levels of activity are presented below:
| Month |
Machine-Hours |
Total Overhead Cost |
| March |
54,000 |
$196,400 |
| April |
44,000 |
$171,400 |
| May |
64,000 |
$221,400 |
| June |
74,000 |
$246,400 |
|
|
Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 44,000 machine-hour level of activity is as follows:
|
|
|
|
| Utilities (variable) |
$ |
57,200 |
| Supervisory salaries (fixed) |
|
45,000 |
| Maintenance (mixed) |
|
69,200 |
|
|
|
| Total overhead cost |
$ |
171,400 |
|
|
|
|
| The company wants to break down the maintenance cost into its variable and fixed cost elements. |
| 1. |
Estimate how much of the $246,400 of overhead cost in June was maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $246,400 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs within the relevant range.) (Do not round intermediate calculations. Omit the "$" sign in your response.)
|
| Maintenance cost in June |
$ |
| 2. |
Using the high-low method, estimate a cost formula for maintenance. (Round the "Variable cost per unit" to 2 decimal places and "Fixed cost" to the nearest dollar amount. Omit the "$" sign in your response.)
|
| 3. |
Express the company's total overhead cost in the form Y = a + bX. (Round the "Variable cost per unit" to 2 decimal places and "Fixed cost" to the nearest dollar amount. Omit the "$" sign in your response.)
|
| 4. |
What total overhead cost would you expect to be incurred at an activity level of 49,000 machine-hours?(Do not round intermediate calculations. Omit the "$" sign in your response.)
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