Echeverria S.A. is an Argentinian manufacturing company whose total factory over

Question

Echeverria S.A. 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: Level of Activity Low 73,000 High 93,000 Machine-hours Total factory overhead costs 379,400 pesos 427,400 pesos The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 73,000 machine-hours level of activity as follows: Indirect materials (variable) Rent (fixed) Maintenance (mixed) 123,370 pesos 166,000 90,030 Total factory overhead costs 379,400 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 427,400 pesos at the high level of activity consists of maintenance cost. (Hint: First determine how much of the 427,400 pesos cost consists of indirect materials and rent. Think about the behaviour of variable and fixed costs.) (Do not round intermediate calculations.) ce cost pesos 2. Using the high-low method, estimate a cost formula for maintenance. (Round variable cost to 2 decimal place and fixed cost to the nearest dollar amount.) esos +

Explanation / Answer

1 Maintenance cost = 427400-(123370/73000*93000)-166000= 104230 2 Variable cost for maintenance = (104230-90030)/(93000-73000)= 0.71 Fixed cost for maintenance = 104230-(93000*0.71)= 38200 Y = 38200 pesos+0.71 peso X 3 Indirect materials 131820 =123370/73000*78000 Rent 166000 Maintenance 93580 =38200+(78000*0.71) Total factory overhead 391400

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.