Question
Litex Companys total factory overhead costs fluctuate considerably from year to year according to the number of direct labour hours worked in its factory. These
Litex Companys total factory overhead costs fluctuate considerably from year to year according to the number of direct labour hours worked in its factory. These costs at high and low levels of activity for recent years are given below:
| Level of activity | |
| Low | High |
Direct labour hours | 60,000 | 80,000 |
Total factory overheads | $ 244,000 | $ 282,000 |
The factory overhead costs above consist of indirect materials, rent and maintenance. The company has analyzed these costs at the 60,000 direct labour hours level of activity and has determined that at this activity level, these costs exist in the following proportions:
| $. |
Indirect materials | 90,000 |
Rent (fixed) | 100,000 |
Maintenance (mixed) | 54,000 |
| 244,000 |
For planning purposes, the company wants to break down the maintenance costs into variable and fixed cost elements.
Required:
- Determine how much of the $ 282,000 factory overhead cost at high level of activity above consists of maintenance costs.
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