High level of activity consists of maintenance cost

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Reference no: EM13548083

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 (in Japanese yen, denoted V) at high and low levels of activity for recent years are given below:

1953_High level of activity consists of maintenance cost.PNG

The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 50,000-hour level of activity as follows:

727_High level of activity consists of maintenance cost1.PNG

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 ?Yl7,625,000 factory overhead cost at the high level of activity consists of maintenance cost.

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 directlabor-hours?

Reference no: EM13548083

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High level of activity consists of maintenance cost : High level of activity consists of maintenance cost - company to incur at an operating level of 70,000 directlabor-hours?
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