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
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 | High | |||
Machine-hours | 74,700 | 84,700 | ||
Total factory overhead costs | 321,183 | pesos | 340,083 | pesos |
The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 74,700 machine-hours level of activity as follows: |
Indirect materials (variable) | 99,351 | pesos |
Rent (fixed) | 141,000 | |
Maintenance (mixed) | 80,832 | |
Total factory overhead costs | 321,183 | 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 340,083 pesos at the high level of activity consists of maintenance cost. (Hint: First determine how much of the 340,083 pesos cost consists of indirect materials and rent. Think about the behaviour of variable and fixed costs.) (Do not round intermediate calculations.) maintenance cost?? |
2. | Using the highlow method, estimate a cost formula for maintenance. (Round variable cost to 2 decimal place and fixed cost to the nearest dollar amount.) |
Y= ?? pesos + ?? pesos X |
3. | What total overhead costs would you expect the company to incur at an operating level of 79,700 machine-hours? (Do not round intermediate calculations.) |
total factory overhead costs?? |
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