Connect x Homework App 5A Help Save Exit Subit 2 Problem SA8

Connect x Homework App 5A Help Save &Exit; Subit 2 Problem SA-8 High-Low Method; Predicting Cost [LOS-10) Nova Company\'s total overhead cost at various levels of actvity are presented below Tosal 43,00 180,06t 3, 000234,460 73,000 261,640 Assume that the total overhead cost above consists of ubities, supervisory salaries, and maintenance. The breakdown of these costs at the 43,000 machine-hour level of activity is: veilities (varieble) Supervisory salaries (tixed) Nova Company\'s management wants to break down the maintenance cost into its variable and fiwed cost in July was maintenance cost.nt to thisit may be heiplu to frst Required: 1. Estimate how much of the $261660 of overhead determine how much of the $261,660 consisted of ubilities and costsl supervisory salaries. Think about the behavior of variable and fed

Solution

Answer 1. Using the High Low Method: Machine Hours Maintenance Costs High Activity Level                                  73,000                       261,660.00 Low Activity level                                  43,000                       180,060.00 Difference                                  30,000                         81,600.00 Variable Rate = Change in Cost / Change in Activity Variable Rate = $81,600 / 30,000 Mach hrs Variable Rate = $2.72 per mach hr Fixed Cost = $261,660 - (73,000 Mach Hrs - 30,000 Mach hrs) Fixed Cost = $63,100 At 73,000 Mach Hrs Variable Fixed Total Total Overhead                         198,560.00                         63,100.00    261,660.00 Utilities - $1.60 X 73,000 Mach Hrs                         116,800.00                                         -      116,800.00 Supervisory Salaries                                           -                           48,000.00      48,000.00 Maintenace                            81,760.00                         15,100.00      96,860.00 ($198,560 - $116,800) ($63,100 - $48,000) Utilities - Variable Cost per Mach Hr = $68,800 / 43,000 Mach hrs = $1.60 per Mach Hrs Answer 3. The total overhead in: Y = a + bX is Y = $63,100 + $2.72 X Variable Fixed Utilities -                                      1.60                                         -   Supervisory Salaries                                           -                           48,000.00 Maintenace ($2.72 - $1.60)                                      1.12                         15,100.00 Total Overhead Cost                                      2.72                         63,100.00