Nova Companys total overhead cost at various levels of activ

Nova Company\'s total overhead cost at various levels of activity are presented below: Total Machine-Overhead Month April May une July Hours 55,000 45,000 203,050 65,000 75,000 284,950 Cost 230,350 257,650 Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 45,000 machine-hour level of activity is: Utilities (variable) Supervisory salaries (fixed) Maintenance (mixed) Total overhead cost $67,500 61,000 74,550 $203,050 Nova Company\'s management wants to break down the maintenance cost into its variable and fixed cost elements

Solution

Y = a + bX
Y = 80200 + 2.73X

A	B	C	D	E
Month	Machine Hours	Total Over Head Cost	Fixed Cost	C - D
April	55000	$                  230,350.00	$ 61,000.00	$ 169,350.00
May	45000	$                  203,050.00	$ 61,000.00	$ 142,050.00
Change	10000			$    27,300.00
Variable Cost Per hour				$               2.73
(Change in Cost / Change in Hours)
Total variable cost for 45000 hours in may				$ 122,850.00
($2.73 x 45000)
Fixed Cost in Maintenance				$    19,200.00
($ 142,050.00 - $122,850)