Question

At an activity level of 8,500 machine-hours in a month, Falks Corporation’s total variable production engineering cost is $748,850 and its total fixed production engineering cost is $177,760. What would be the total production engineering cost per machine-hour, both fixed and variable, at an activity level of 8,800 machine-hours in a month?

Answer 1

Answer:

$108.30 per machine-hour

Explanation:

To find out the  total production engineering cost per machine-hour, first, we have to compute the variable cost per machine hour which is shown below:

Variable cost per machine hour = Total variable production engineering cost ÷ machine hours

= $748,850 ÷ 8,500 machine hours

= $88.1

For 8,800 machine hours, the variable cost would be

= $88.1 × 8,800 machine hours

= $775,280

And the total fixed production engineering cost is $177,760.

So, the total production engineering cost is

= $775,280 + $177,760

= $953,040

And the per unit would be

= $953,040 ÷ 8,800 machine hours

= $108.30 per machine-hour