Nova company’s total overhead cost at various levels of activity are presented below:

Assume that the total overhead cost above consist of utilities,
supervisory salaries and maintenance. The breakdown of these costs
at the 60,000 machine hour level of activity is: Utilities
(variable)……………………………………48,000
supervisory salaries
(fixed)…………………………..21,000
maintenance
(mixed)………………………………..105,000
174,000
Nova managements want to break down the maintenance cost into
variable and fixed cost elements.
required:
1. Estimate how much of the $246,000 of overhead cost in July was
maintenance cost.
2. using the high-low method, estimate a cost formula for
maintenance.
3. express the company’s total overhead cost in the linear equation
form Y=a+bX
4. what total overhead cost would you expect to be incurred at an
operating activity level of 75,000 machine hour?

1
Total overhead cost	246000
Less: Utilities	72000	=48000/60000*90000
Less: Supervisory salaries	21000
Maintenance cost in July	153000
2
	Machine hours	Maintenance cost
High level	90000	153000
Low level	60000	105000
Difference	30000	48000
Variable cost	1.60	=48000/30000
Fixed cost	9000	=153000-(90000*1.60)
Y = 9000 + 1.60 X
3
	Variable cost per machine hour	Fixed cost
Utilities cost	0.80
Supervisory salaries cost		21000
Maintenance cost	1.60	9000
Total overhead cost	2.40	30000
Y = 30000 + 2.40 X
4
Total overhead costs	210000	=30000+(75000*2.40)