Reference no: EM132542579
Colby Limited is a manufacturing company whose total factory overhead costs fluctuate somewhat from year to year, according to the number of machine-hours worked in its production facility.
These costs at high and low levels of activity over recent years are given below:
Level of Activity Low High
Machine-hours 61,500 81,500
Total factory overhead costs $34,589,500 $39,049,500
The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 61,500 machine-hours level of activity as follows:
Indirect materials (variable)$9,102,000
Rent (fixed)17,200,000
Maintenance (mixed)8,287,500
Total factory overhead costs$34,589,500
Question 1: For planning purposes, the company wants to break down the maintenance cost into its variable and fixed cost elements.
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