Question

At an activity level of 9,300 machine-hours in a month, Falks Corporation’s total variable production engineering cost is $829,560 and its total fixed production engineering cost is $192,960. What would be the total production engineering cost per machine-hour, both fixed and variable, at an activity level of 9,600 machine-hours in a month? Assume that this level of activity is within the relevant range

Answer 1

Answer: $109.3 per machine hour

Explanation: We can compute total production engineering cost per hour by using following equation :-

$=cost\:per\:machine\:hour=\frac{fixed\:cost\:+\:variable\:cost}{total\:machine\:hours}$

but first we need to calculate variable cost at 9600 hours :-

$=\ 829,560\times\frac{9600hr}{9300hr}$

       = $856,320

now,

$=cost\:per\:machine\:hour=\frac{\ 192,960+\ 856,320}{9600hr}$

      =$109.3 per machine hour