Reference no: EM131671197

Question - Total overhead costs at various levels of activity are given below:

Month                  DL Hours                  Total Ohd Costs

March                   80,000                         $412,500

April                     90,000                         410,000

May                      100,000                       585,000

June                     120,000                       582,500

Assume that overhead costs consist of rent, indirect materials, utilities, supervisory salaries, and maintenance. The proportion of these costs at the 80,000 direct labor-hour level of activity is:

Rent (F)                                   $ 20,500

Indirect materials (V)                160,000

Supervisory salaries (F)            30,000

Utilities (V)                              80,000

Maintenance (M)                      122,000

Total                                      $412,500

(F) = Fixed; (V) = Variable; (M) = Mixed

The company wants to break down the maintenance cost into its variable and fixed cost components.

1. By means of the high-low method, determine the cost formula for maintenance.

2. Express the company's total overhead cost in linear equation form.

3. What total overhead cost would you expect to incur at an operating activity of 75,000 direct labor hours? At 115,000 direct labor hours?