Estimate how much of the $319,660 factory overhead cost at the high level of act

Question

Estimate how much of the $319,660 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 $319,660 consists of indirect materials and rent. Think about the behavior of variable and fixed costs!) (Do not round intermediate calculations.) Pad 1.00 points Sawaya Co, Ltd, Japan is a manufacturing company whose total factory owerhead costs fuctuate 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 Low Direct labor-hours Total factory overhead costs 281,020 $319.660 The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 55,200-hour level of activity as follows Rent (foed) Maintenance (med) s 88,320 140,000 2,700 Total factory overhead costs 281,020 To have data available for planning the company wants to break down the maintenance cost into its variable and fxed cost elements Required: 1. Estimate how much of the $319660 factory overhead cost at the high levell of activity consists of maintenance cost. (Hint To do this, it may be helpful to first determine how much of the $319,660 consists of indirect materials and rent. Think about the behavior of variable and fxed costs) (Do not round intermediate calculations.) 2. Using the high-low method, estimate a cost formula for maintenance. (Do not round intermediate calculations. Round "Variable cost element" to 2 decimal places. High level of activity evel of activity Change1 8.400 (52.700) Variable cost element Fixed cost element per DLH $ 0.50 3, What total factory overhead costs would you expect the company to incur at an operating level of 60720 direct labor-hours? (Do not round intermediate calculations)

Explanation / Answer

1 Maintenance cost at high level of activity=319660-(88320/55200*73600)-140000= $61900 2 Direct labor hours Maintenance cost High level of activity 73600 61900 Low level of activity 55200 52700 Change 18400 9200 Variable cost element 0.5 per DLH Fixed cost element 25100 3 Total factory overhead cost=60720*(1.6+0.5)+140000+25100= $292612

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