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		57,900		77,200
Total factory overhead costs	$	243,340	$	274,220

The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 57,900-hour level of activity as follows:

Indirect materials (variable)	$	69,480
Rent (fixed)		125,000
Maintenance (mixed)		48,860
Total factory overhead costs	$	243,340

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 $274,220 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 $274,220 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. Round "Variable cost element" to 2 decimal places.)

3.	What total factory overhead costs would you expect the company to incur at an operating level of 63,690 direct labor-hours? (Do not round intermediate calculations.)

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: Direct labor-hours Total factory overhead costs Level of Activity Low High 57,900 7 7,200 $243,340 $274,220 The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 57,900-hour level of activity as follows: Indirect materials (variable) Rent (fixed) Maintenance (mixed) $ 69,480 125,000 48,860 Total factory overhead costs $ 243,340 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 $274,220 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 $274,220 consists of indirect materials and rent. Think about the behavior of variable and fixed costs!) (Do not round intermediate calculations.) Maintenance cost at high level of activity $ 56,580 2. Using the high-low method, estimate a cost formula for maintenance. (Do not round intermediate calculations. Round "Variable cost element" to 2 decimal places.) Direct Labor- Maintenance Hours Cost High level of activity Low level of activity Change per DLH Variable cost element Fixed cost element Y= 3. What total factory overhead costs would you expect the company to incur at an operating level of 63,690 direct labor-hours? (Do not round intermediate calculations.) Total factory overhead cost