Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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
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 49,500 66,000 Total factory overhead costs 252,050 pesos 283,400 pesos The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 49,500 machine-hours level of activity as follows: Indirect materials (variable) 74,250 pesos Rent (fixed) 128,000 Maintenance (mixed) 49,800 Total factory overhead costs 252,050 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 283,400 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 283,400 pesos cost consists of indirect materials and rent. Think about the behavior of variable and fixed costs.) (Do not round intermediate calculations. Omit the "pesos" sign in your response.) 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. Omit the "pesos" sign in your response.) Y = pesos + peso X 3. What total overhead costs would you expect the company to incur at an operating level of 54,450 machine-hours? (Do not round intermediate calculations. Omit the "pesos" sign in your response.) Total factory overhead cost pesos
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started