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Sawaya Co., Ltd.
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 ¥) at high and low levels of activity for recent years are given below: Level of Activity LowHighThe factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 58,500-hour level of activity as follows: Indirect materials (variable) ¥87,750 Rent (fixed)124,000 Maintenance (mixed)69,600 Total factory overhead costs¥281,350 To have data available for planning, the company wants to break down the maintenance cost into its variable and fixed cost elements.Requirement 1:Estimate how much of the ¥322,300 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 ¥322,300 consists of indirect materials and rent. Think about the behavior of variable and fixed costs!) (Omit the "¥" sign in your response.) Maintenance cost¥ Requirement 2:Using the high-low method, estimate a cost formula for maintenance where X represents the number of direct-labor hours. (Round variable cost per unit to 2 decimal places. Omit the "¥" sign in your response.) Y =¥ +¥ X Requirement 3:What total factory overhead costs would you expect the company to incur at an operating level of 64,350 direct labor-hours? (Omit the "¥" sign in your response.) Indirect materials ¥ Rent Maintenance: Variable cost element¥ Fixed cost element Total factory overhead cost ¥
