hw ch2.2

Sawaya Co., Ltd., of Japan is a manufacturing company whose total factory overhead costs fluctuate considerably from year to year according to increases and decreases in the number of direct labor-hours worked in the factory. Total factory overhead costs at high and low levels of activity for recent years are given below:

	Level of Activity
	Low				High
Direct labor-hours		55,200			73,600
Total factory overhead costs	$	280,620		$	319,260

The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 55,200-hour level of activity as follows:

Indirect materials (variable)	$	99,360
Rent (fixed)		134,000
Maintenance (mixed)		47,260
Total factory overhead costs	$	280,620

To have data available for planning, the company wants to break down the maintenance cost into its variable and fixed cost elements.