Question

At an activity level of 9,600 machine-hours in a month, Ruben Corporation’s total variable production engineering cost is $827,520 and its total fixed production engineering cost is $248,490. What would be the total production engineering cost per machine-hour, both fixed and variable, at an activity level of 9,900 machine-hours in a month? Assume that this level of activity is within the relevant range.

Answer 1

Answer:

Total cost per hours= $111.3

Explanation:

Giving the following information:

The activity of 9,600 hours:

Total variable cost= $827,520

Total fixed costs= $248,490.

First, we need to calculate the unitary variable cost:

Unitary variable cost= 827,520/9,600= $86.2

Because the 9,900 units are between the relevant range, the total fixed costs remain the same. For the same reason, the unitary variable cost per hour remains the same. Only the total variable cost varies with production (in unitary terms is constant).

Unitary cost per hout= $86.2

Unitary fixed cost= 248,490/9,900= $25.1

Total cost per hours= $111.3