MANAGERIAL ACCOUNTING FOR MANAGERS
5th Edition
ISBN: 9781264196456
Author: Noreen
Publisher: MCG
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Chapter 2A, Problem 2A.8P
High-Low Method; Predicting Cost LO2—10
Nova Company’s total
Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 60,000 machine-hour level of activity is:
Nova Company’s management wants to break down the maintenance cost into its variable and fixed cost elements.
Required:
- Estimate how much of the $246,000 of overhead cost in July was maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $246,000 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs.)
- Using the high-low method, estimate a cost formula for maintenance in the form
- Express the company’s total overhead cost in the form
- What total overhead cost would you expect to be incurred at an activity level of 75,000 machine-hours?
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Chapter 2A Solutions
MANAGERIAL ACCOUNTING FOR MANAGERS
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