5. 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:

	Level of Activity
	Low		High
Machine-hours	66,300		88,400
Total factory overhead costs	265,720	pesos	296,660	pesos

The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 66,300 machine-hours level of activity as follows:

Indirect materials (variable)	79,560	pesos
Rent (fixed)	139,000
Maintenance (mixed)	47,160
Total factory overhead costs	265,720	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 296,660 pesos 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 296,660 pesos cost consists of indirect materials and rent. Think about the behavior of variable and fixed costs.) (Do not round intermediate calculations.)

Maintenance cost at high level of activity

pesos

2.	Using the high-low method, estimate a cost formula for maintenance. (X represent per machine-hour.) (Round the "Variable cost per machine-hour" to 2 decimal places and "Fixed cost" to the nearest whole number.)

Y =

pesos

+

peso X

3.	What total overhead costs would you expect the company to incur at an operating level of 72,930 machine-hours? (Do not round intermediate calculations. )

Total factory overhead cost

pesos