Company C is a highly automated manufacturer. At an activity level of 6,000 machine setups, total overhead cost equal R.O. 240,000. Of this amount depreciation totals R.O. 80,000(fixed) and lubrication totals R.O. 72,000(variable). The remaining R.O. 88,000 of the total overhead cost consists of utility cost (mixed). At an activity level of 10,000 setups, total overhead costs equal R.O. 320,000. Assume all these costs and activity levels are within the relevant range.

Using the high low method, estimate the cost formula for utilities.

What overhead costs would you expect to be incurred for the next period at an activity level of 7,800 setups?