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 cost $194,000
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. C. Estimate the total overhead cost at an activity level of 55,000 machine hours.