Nova Company's total overhead cost at various levels of activity are presented below: Total Overhead Cost $216,510 $ 190,810 $ 242,210 $ 267,910 Month April May June July Machine-Hours 53,000 43,000 63,000 73,000 Assume the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 43,000 machine-hour level of activity is: Utilities (variable) Supervisory salaries (fixed) Maintenance (mixed) Total overhead cost $ 64,500 62,000 64,310 $ 190,810 Nova Company's management wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the $267,910 of overhead cost in July was maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $267,910 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs 2. Using the high-low method, estimate a cost formula for maintenance in the form Y= a +bX. 3. Express the company's total overhead cost in the form Y = a +bX. 4. What total overhead cost would you expect at an activity level of 48,000 machine-hours?

Nova Company's total overhead cost at various levels of activity are presented below: Total Overhead Cost $216,510 $ 190,810 $ 242,210 $ 267,910 Month April May June July Machine-Hours 53,000 43,000 63,000 73,000 Assume the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 43,000 machine-hour level of activity is: Utilities (variable) Supervisory salaries (fixed) Maintenance (mixed) Total overhead cost $ 64,500 62,000 64,310 $ 190,810 Nova Company's management wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the $267,910 of overhead cost in July was maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $267,910 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs 2. Using the high-low method, estimate a cost formula for maintenance in the form Y= a +bX. 3. Express the company's total overhead cost in the form Y = a +bX. 4. What total overhead cost would you expect at an activity level of 48,000 machine-hours?

Name: 2 Problem 5A-8 (Algo) High-Low Method; Predicting Cost [LO5-10]Nova Co
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Description: 2 Problem 5A-8 (Algo) High-Low Method; Predicting Cost [LO5-10]Nova Company's total overhead cost at various levels of activity are presented below:Total OverheadCost$ 216,510$ 190,810$ 242,210$ 267,910MonthAprilMayJuneJulyMachine-Hours53,00043,00063

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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