Echeverria SA is an Argentinian manufacturing company whose total factory overhead costs fluctuate somewhat from year to
Question:
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?
Step by Step Answer:
Managerial Accounting
ISBN: 9780073526706
12th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer