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# Nova Company high low method

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Nova Company's total overhead costs at various levels of activity are presented below:

Month Machine Hours Total Overhead Costs
April 70,000 \$198,000
May 60,000 \$174,000
June 80,000 \$222,000
July 90,000 \$246,000

Assume that the total overhead costs above consist of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 60,000 machine-hour level of activity is:

Utilites (variable) \$48,000
Supervisory salaries (fixed) 21,000
Maintenance (mixed) 105,000

Required:

1. estimate how much of the \$246,000 of overhead cost in July was maintenance cost
2. Using the high-low method, estimate a cost formula for maintenance
3. Express the company's total overhead costs in the linear equation form Y = a + bX
4. What total overhead costs would you expect to be incurred at an operating level of 75,000 machine hours?