Kano Processing Limited operates a production system where total overhead cost is semi-variable. The company recorded the following activity levels and total overhead costs for two recent periods: - Lowest activity level: 4,000 units at a total overhead cost of ₦2,200,000 - Highest activity level: 12,000 units at a total overhead cost of ₦4,800,000 Total fixed costs step up by 20% for production activity exceeding 8,000 units. Using the modified high-low method, what is the estimated total overhead cost for an output level of 9,000 units?

Let V be variable cost per unit and F be base fixed cost. At 4,000 units (<= 8,000 units), F + 4,000V = ₦2,200,000, so F = ₦2,200,000 - 4,000V. At 12,000 units (> 8,000 units), fixed costs step up by 20%, giving 1.20F + 12,000V = ₦4,800,000. Substituting F gives 1.20(2,200,000 - 4,000V) + 12,000V = 4,800,000, which solves to 7,200V = ₦2,160,000, so V = ₦300 per unit and base F = ₦1,000,000. For an output of 9,000 units (which exceeds 8,000 units), the applicable fixed cost is ₦1,200,000 (₦1,000,000 x 1.20), making total overhead cost = ₦1,200,000 + (9,000 x ₦300) = ₦3,900,000.