Dubai Heavy Industries (DHI) is manufacturing company whose total manufacturing overhead costs fluctuate 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

60,000

80,000

Total Manufacturing Overhead Costs

$274,000

$312,000

The manufacturing overhead costs above consist of Indirect Materials, Rent, and Maintenance. The company has analyzed these costs at the 60,000 machine-hours level of activity as follows:

Indirect materials (Variable)

$90,000

Rent (Fixed)

$130,000

Maintenance (Mixed)

$54,000

Total Manufacturing Overhead Costs

$274,000

For planning purposes, the company wants to break down the maintenance cost into its variable and fixed cost elements.Required:

1. Help DHI determine their cost formula/structure.
2. Whattotaloverhead costs would you expect DHI to incur at an operating level of 65,000 machine-hours?