Colby Limited is a manufacturing company whose total factory overhead costs fluctuate somewhat from year to year, according to the number of machine-hours worked in its production facility. These costs at high and low levels of activity over recent years are given below: Level of Activity Low High Machine-hours 74,000 94,000 Total factory overhead costs $42,877,000 $47,837,000 The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 74,000 machine-hours level of activity as follows: Indirect materials (variable) $12,432,000 Rent (fixed) 19,500,000 Maintenance (mixed) 10,945,000 Total factory overhead costs $42,877,000 For planning purposes, the company wants to break down the maintenance cost into its variable and fixed cost elements.

Required: 1. Estimate how much of the factory overhead cost of $47,837,000 at the high level of activity consists of maintenance cost.

2. Using the highlow method, estimate a cost formula for maintenance.

3. What total overhead costs would you expect the company to incur at an operating level of 79,000 machine-hours?