Nova Company’s total overhead cost at various levels of activity are presented b
ID: 464521 • Letter: N
Question
Nova Company’s total overhead cost at various levels of activity are presented below:
Assume that the total 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:
Nova Company’s management wants to break down the maintenance cost into its variable and fixed cost elements.
Estimate how much of the $256,540 of overhead cost in July was maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $256,540 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs!) (Do not round intermediate calculations.)
Using the high-low method, estimate a cost formula for maintenance. (Do not round your intermediate calculations. Round the "Variable cost per unit" to 2 decimal places.)
X
3. Express the company’s total overhead cost in the linear equation form Y = a + bX. (Do not round your intermediate calculations. Round the "Variable cost per unit" to 2 decimal places.)
What total overhead cost would you expect to be incurred at an activity level of 49,000 machine-hours? (Do not round intermediate calculations.)
Month Machine-Hours Total Overhead Cost April 54,000 $208,340 May 44,000 $184,240 June 64,000 $232,440 July 74,000 $256,540Explanation / Answer
1)
Cost formula = $17,200+1.11*No of machine hour
No of machine Hours 44000 Total Utilities (variable) $ 57200 Utlities exp per hour 1.3 Total Overhead in July (In$) 256540 No of machine Hours In July 74000 Utlities exp per hour 1.3 Total Utilities (variable) $ 96200 Supervisory salaries (fixed) 61000 Maintenance cost in July $99340Related Questions
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