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Question - The Thomas Company's total overhead costs at various levels of activity are presented below:
Month
Direct Labor Hours
Total Overhead
July
7,500
$272,000
August
6,000
234,000
September
9,000
319,000
October
10,500
340,500
Assume that the overhead costs above consist of Utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 9,000 direct labor hour level of activity is as follows:
Utilities (V)
$137,700
Supervisory Salaries (F)
80,000
Maintenance (M)
101,300
Required -
(a) Using the high-low method, determine the cost formula for maintenance.
(b) Express the company total overhead costs in linear equation form.
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