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Problem 3-17 High-Low Method; Predicting Cost [LO1, LO2] 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 tow levels of activity over recent years are given below: The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 50,000 machine-hours level of activity as follows: For planning purposes, the company wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the factory overhead cost of $17,625,000 at the high level of activity consists of maintenance cost. (Hint: First determine how much of the $17,625,000 cost consists of indirect materials and rent. Think about the behaviour of variable and foxed costs.) (Do not round intermediate calculations.) 2. Using the high-low method, estimate a cost formula for maintenance, (Round variable cost to 1 decimal place and fixed cost to the nearest dollar amount.) 3. What total overhead costs would you expect the company to incur at an operating level of 70,000 machine-hours? (Do not round intermediate calculations.)

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