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 75,000 100,000

Total factory overhead costs $299,800 $344,800

The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 75,000-hour level of activity as follows:

Indirect materials (variable)$105,000

Rent (fixed)134,000

Maintenance (mixed)60,800

Total factory overhead costs$299,800

1.Estimate how much of the $344,800 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 $344,800 consists of indirect materials and rent. Think about the behavior of variable and fixed costs!)

Maintainance Cost at High Level Activity =

2.Using the high-low method, estimate a cost formula for maintenance

Variable Cost Element

Fixed Cost Element

Equation Y=_+_x

3.What total factory overhead costs would you expect the company to incur at an operating level of 82,500 direct labor-hours?