Dubai Heavy Industries (DHI) is manufacturing company whose total manufacturing 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	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 (please see the table below).

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. What total overhead costs would you expect DHI to incur at an operating level of 65,000 machine-hours?

Indirect materials (Variable)	$90,000
Rent (Fixed)	$130,000
Maintenance (Mixed)	$54,000
Total Manufacturing Overhead Costs	$274,000