Company wants to break down the maintenance

Reference no: EM131016756

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 65,700 87,600 Total factory overhead costs $ 265,960 $ 305,380 The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 65,700-hour level of activity as follows: Indirect materials (variable) $ 98,550 Rent (fixed) 121,000 Maintenance (mixed) 46,410 Total factory overhead costs $ 265,960 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 $305,380 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 $305,380 consists of indirect materials and rent. Think about the behavior of variable and fixed costs!) (Do not round intermediate calculations.)

Reference no: EM131016756

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