Golden Company's total overhead cost at various levels of activity are presented below:
| Month |
Machine-Hours |
Total Overhead Cost |
| March |
54,000 |
$218,820 |
| April |
44,000 |
$192,520 |
| May |
64,000 |
$245,120 |
| June |
74,000 |
$271,420 |
|
|
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) |
$ |
66,000 |
| Supervisory salaries (fixed) |
|
62,000 |
| Maintenance (mixed) |
|
64,520 |
|
|
|
| Total overhead cost |
$ |
192,520 |
|
|
|
|
| The company wants to break down the maintenance cost into its variable and fixed cost elements. |
| 1. |
Estimate how much of the $271,420 of overhead cost in June was maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $271,420 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs within the relevant range.) (Do not round intermediate calculations.)
|
| 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.)
|
| 3. |
Express the company's total overhead cost in the form Y = a + bX. (Round the "Variable cost per unit" to 2 decimal places.)
|
| 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.)
|