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 labour$-$hours worked in the factory. Total factory overhead costs $($in Japanese yen, denoted $)$ at high and low levels of activity for recent years are given below:

Level of activity

Low High

Direct labour$-$hours $50,00075,000$

Total factory overhead costs $14,200,00017,807,000$

The factory overhead costs above consist of indirect materials, rent and maintenance. The company has analysed these costs at the $50,000-$hour level of activity as follows:

Indirect materials $($V$)5,000,000$

Rent $($F$)6,000,000$

Maintenance $($M$)3,200,000$

Total factory overhead costs $14,200,000$

V $=$ variable; F $=$ fixed; M $=$ mixed.

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

Required:

$1.$ Estimate how much of the $17,807,000$ factory overhead cost at the high level of activity consists of maintenance cost. $($Hint: To do this, it may be helpful to first determine how much of the $17,807,000$ consists of indirect materials and rent. Think about the behaviour of variable and fixed costs!$)$

$2.$ By means of the high$-$low method of cost analysis, estimate a cost formula for maintenance. $($Do not round variable cost element in the intermediate calculations. Round the first coefficient to nearest whole number and round the second coefficient to $2$ decimal places.$)$

$3.$ What total factory overhead costs would you expect the company to incur at an operating level of $70,000$ direct labour$-$hours? $($Do not round variable cost element in the intermediate calculations. Round your answer to nearest whole number.$)$