Question - The Thomas Company's total overhead costs at various levels of activity are presented below:
|
Month
|
Direct Labor Hours
|
Total Overhead
|
|
July
|
7,500
|
$272,000
|
|
August
|
6,000
|
234,000
|
|
September
|
9,000
|
319,000
|
|
October
|
10,500
|
340,500
|
Assume that the overhead costs above consist of Utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 9,000 direct labor hour level of activity is as follows:
|
Utilities (V)
|
$137,700
|
|
Supervisory Salaries (F)
|
80,000
|
|
Maintenance (M)
|
101,300
|
|
|
319,000
|
Required -
(a) Using the high-low method, determine the cost formula for maintenance.
(b) Express the company total overhead costs in linear equation form.