Answer:
Check the explanation
Explanation:
Machine hours available at different capacity utilizatiion
at 30% = 217000*30% = 65100
at 90% = 217000*90% = 195300
at 85% = 217000*85% =184450
PER HOUR RATE OF COST A AT 90% CAPACITY
Irrespective of capacity utilization fixed cost will remain same
at different capacity utilization cost A is $457000, so that it is Fixed cost
Per hour rate = $457000/195300 hrs
= 2.34 per hour
COST B AT 30% CAPACITY
per hour rate of cost B is remains same in both 30% and 90%
per unit or per hour variable cost will be same at different capacity only if it is Variable cost
So that Cost B at 30% capacity can be calculated as follows
= 12.5*65,100hrs
=$813,750
COSTS THAT WILL INCUR AT 85% CAPACITY UTILIZATION
Cost A = $457,000 (as fixed cost will remain same)
Cost B = $12.5*184450 hrs
= $2,305,625 (as variable cost rate per hour will remain same)
Cost C:
As it semi-variable cost we have to find out fixed cost within that
for that first we have to calculate variable cost per hour
VC/hr = Change in Variable cost / Change in machine hours
=(1,347,000-765,000) / (195300-65100)
=582000 / 130200
=$4.47
so variable cost at 30% =4.47*65100
=$290,997
variable cost at 90% = 4.47*195300
= $872,991
So fixed cost of C = Total cost of C - Variable cost of
at 30% capacity = 765000 - 290997
= 474003
( checking correctness) at 90% = 1,347,000 - 872991
=47009 (approx)
So, COST C AT 85% capacity utilization
=variable cost + fixed cost
=(4.47*184450hrs) + 474009
=824491.5 + 474009
=$1,298,500.5
TOTAL COST AT 85% CAPACITY UTILIZATION
=cost A+ cost B+ cost C
=$457,000+$2,305,625+$1,298,500.5
=$4,061,125
