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PROBLEM 2–21 High-Low Method; Predicting Cost [LO3, LO4] Golden Company’s total overhead cost at… 1 answer below » PROBLEM 2–21 High-Low Method; Predicting Cost [LO3, LO4] Golden Company’s total overhead cost at various levels of activity are presented below: View complete question » Month Machine-Hours Total Overhead Cost March . . . . . . . . . . . . . . . . . . . . . 50,000 $194,000 April . . . . . . . . . . . . . . . . . . . . 40,000 $170,200 May . . . . . . . . . . . . . . . . . . . . . 60,000 $217,800 June . . . . . . . . . . . . . . . . . . . . . . . . . 70,000 $ PROBLEM 2–21 High-Low Method; Predicting Cost [LO3, LO4] Golden Company’s total overhead cost at various levels of activity are presented below: Month Machine-Hours Total Overhead Cost March . . . . . . . . . . . . . . . . . . . . . 50,000 $194,000 April . . . . . . . . . . . . . . . . . . . . 40,000 $170,200 May . . . . . . . . . . . . . . . . . . . . . 60,000 $217,800 June . . . . . . . . . . . . . . . . . . . . . . . . . 70,000 $241,600 Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 40,000 machine-hour level of activity is as follows: The company wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the $241,600 of overhead cost in June was maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $241,600 consisted of utili- ties and supervisory salaries. Think about the behavior of variable and fixed costs within the relevant range.) 2. Using the high-low method, estimate a cost formula for maintenance. 3. Express the company’s total overhead cost in the form Y = a + bX. 4. What total overhead cost would you expect to be incurred at an activity level of 45,000 machine-hours? View less » Dec 07 2015 05:40 PM
