Echeverria SA is an Argentinian manufacturing company whose tota

Echeverria SA is an Argentinian 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 (in Argentinian pesos) at high and low 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 60,000 machine-hours level of activity as follows:
Indirect materials (variable) . . . . . . . . . 90,000 pesos
Rent (fixed) . . . . . . . . . . . . . . . . . . . . . . 130,000
Maintenance (mixed) . . . . . . . . . . . . . . 54,000
Total factory overhead costs . . . . . . . . 274,000 pesos
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 312,000 pesos 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 overhead costs would you expect the company to incur at an operating level of 65,000machine-hours?

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  • CreatedMarch 30, 2012
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