PROBLEM 3-17 High-Low Method; Predicting Cost [L01 Q. L02 01 Colby Limited is a manufacturing company whose total factory 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 50,000 75,000 Total factory overhead costs $14,250,000 $17,625,000 Page 89 The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 50.000 machine-hours level of activity as follows: Indirect materials (variable) $ 5,000,000 Rent (fixed) 6,000,000 Maintenance (mixed) 3,250,000 Total factory overhead costs $14,250,000 For planning purposes, the company wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the factory overhead cost of $17,625,000 at the high level of activity consists of maintenance cost. 2. Using the high-low method, estimate a cost formula for maintenance. 3. What total overhead costs would you expect the company to incur at an operating level of 70,000 machine-hours