Sawaya Co., Ltd., of Japan is a manufacturing company considerably from year to

Question

Sawaya Co., Ltd., of Japan is a manufacturing company 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: whose total factory overhead costs fluctuate Level of Activi Low 45,600 High 60,800 Direct labor-hours Total factory overhead costs $242,460 $274,380 The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 45,600-hour level of activity as follows Indirect materials (variable) Rent (fixed) Maintenance (mixed) $ 72,960 121,000 48,500 Total factory overhead costs $242,460 To have data available for planning, the variable and fixed cost elements company wants to break down the maintenance cost into its Required 1. Estimate how much of the $274,380 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 $274,380 consists of indirect materials and rent. Think about the behavior of variable and fixed costs!) (Do not round intermediate calculations.) Maintenance cost at high level of activity

Explanation / Answer

1) Calculate maintenance cost at high level :

Maintenance cost at high level of activity = $56100

2)

Y = 146700+2.10X

3) Total factory overhead cost = 146700+(50160*2.10) = $252036

Indirect material 97280 Rent 121000 Maintenance cost 56100 Total factory overhead cost 274380

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