Problem 2-17 High-Low Method; Predicting Cost [LO3, LO4]Echeverria SA is an Argentinian manufacturing company whose total factory overhead costs fluctuatesomewhat 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:Machine-hoursTotal factory overhead costsLevel of ActivityLowHigh66,90089,200pesos274,030311,940 pesosThe factory overhead costs above consist of indirect materials, rent, and maintenance. The company hasanalyzed these costs at the 66,900 machine-hours level of activity as follows:Indirect materials (variable)Rent (fixed)Maintenance (mixed)100,350 pesos129,00044,680Total factory overhead costs274,030 pesosFor planning purposes, the company wants to break down the maintenance cost into its variable andfixed cost elements.Required:1. Estimate how much of the factory overhead cost of 311,940 pesos at the high level of activity consistsof maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the 311,940pesos cost consists of indirect materials and rent. Think about the behavior of variable and fixedcosts.) (Do not round intermediate calculations. Omit the “pesos” sign in your response.)Maintenance cost at high level of activitypesos
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