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 | | 45,300 | | 60,400 | Total factory overhead costs | $ | 233,740 | $ | 260,920 | | The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 45,300-hour level of activity as follows: | | Indirect materials (variable) | $ | 63,420 | Rent (fixed) | | 122,000 | Maintenance (mixed) | | 48,320 | | | | Total factory overhead costs | $ | 233,740 | | | | | To have data available for planning, the company wants to break down the maintenance cost into its variable and fixed cost elements. | 1. | Estimate how much of the $260,920 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 $260,920 consists of indirect materials and rent. Think about the behavior of variable and fixed costs!) (Do not round intermediate calculations.) | | | 2. | Using the high-low method, estimate a cost formula for maintenance. (Do not round intermediate calculations.) | | | 3. | What total factory overhead costs would you expect the company to incur at an operating level of 49,830 direct labor-hours? (Do not round intermediate calculations.) | | | | |