Level of Activity
	July	August	September
Machine-hours	20,000	40,000	60,000
Total factory overhead costs	$6,750,000	$9,610,000	$12,470,000

The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 20,000 machine-hours level of activity as follows:

Indirect materials ($100/machine-hour)

Rent (fixed).$3,000,000

Maintenance (mixed).$1,750,000

For planning purpose, the company wants to analyze the maintenance cost into its variable and fixed cost elements. Show the solution.

A ) Using the high-low method, estimate a cost formula for the maintenance cost

B) Predict the total factory overheads cost for October, November, and December at 80,000, 100,000 and 120,000 activity levels respectively.