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	90,000	61,000
Total Factory Overhead Cost	16,625,000	14,000,000

The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 61,000-hour level of activity as follows:

Indirect Materials (Variable)	5,002,000
Rent (Fixed)	7,000,000
Maintenance (Mixed)	1,998,000
Total Factory overheads Cost	14,000,000

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 $16,625,000 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 $16,625,000 consists of indirect materials and rent. Think about the behavior of variable and fixed costs!)

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

3. What total factory overhead costs would you expect the company to incur at an operating level of 70,000 direct labor-hours?