Nova Company\'s total overhead cost at various levels of activity are presented

Question

Nova Company's total overhead cost at various levels of activity are presented below: Total Overhead Cost Machine- Month April May June July Hours 45,000 196,950 35,000 172,050 55,00 221,850 65,000 246,750 Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 35,000 machine-hour level of activity is Utilities (variable) Supervisory salaries (fixed) Maintenance (mixed) Total overhead cost $ 49,000 68,000 55,050 $172,050

Explanation / Answer

1) Calculate maintenance cost of july :

Maintenance cost of july = $87750

B) Variable cost per machine hour = (87750-55050)/(65000-35000) = 1.09 per machine hour

Fixed cost = 87750-(65000*1.09) = $16900

Y = a+bx

Y = 16900+1.09X

c) Total overhead cost formula :

Y = a+bx

Y = 84900+2.49X

d) Total overhead cost = (40000*2.49)+84900 = $184500

Machine hour 35000 65000 Utilities 49000 91000 Supervisory salary 68000 68000 Maintenance 55050 87750 Total 172050 246750

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