ABC Company's total overhead costs at various levels of activity are presented below:
Machine hours Total overhead costs
March 60,000 $216,800
April 50,000 $194,000
May 70,000 $239,600
June 80,000 $262,400
Assume that the overhead costs above consist of utilities, supervisory salaries, and maintenance. At the 50,000-machine-hour level of activity, these costs are presented below:
Utilities (V) $54,000
Supervisory salaries (F) $62,000
Maintenance (M) $78,000
Total overhead costs $194,000
V = Variable; F = Fixed; M = Mixed.
The company wants to break down the maintenance cost into its basic variable and fixed cost elements.
Required:
a) Estimate the maintenance cost for June.
b) Use the high-low method to estimate the cost formula for maintenance cost.
d) Estimate the total overhead cost at an activity level of 55,000 machine-hours, independent of the separate estimates you obtained for its components.