Determine what the cost formula for total overhead

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Question - Waldorf Corporation had the following overhead costs for the previous year (Waldorf allocates overhead on the basis of direct labour hours):

Labour hours Total Overhead

1st Quarter 7,000 $75,000

2nd Quarter 6,000 $74,000

3rd Quarter 8,000 $77,000

4th Quarter 7,500 $76,000

Assume that total overhead is comprised of Indirect materials (a variable cost), Rent (a fixed cost) and Maintenance (a mixed cost). The breakdown of these three costs at the 6,000 labour hour level is as follows:

Indirect materials (V) $3,600

Rent (F) 35,000

Maintenance (M) 35,400

$74,000

Determine how much of the total overhead at the 8,000 direct labour hour is maintenance. Using the amount just determined and the high low method, estimate a cost formula for maintenance. Determine what the cost formula for total overhead would be and estimate what total overhead costs would be at the 10,000 direct labour hour level.

Reference no: EM132796298

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