Asked by Sydney Henke on Jun 28, 2024
Verified
At an activity level of 9,000 machine-hours in a month, Moffatt Corporation's total variable maintenance cost is $390,240 and its total fixed maintenance cost is $368,280.What would be the average fixed maintenance cost per unit at an activity level of 9,300 machine-hours in a month? Assume that this level of activity is within the relevant range.
A) $40.92
B) $84.28
C) $39.60
D) $54.93
Fixed Maintenance Cost
Costs that do not fluctuate with the level of production or sales, such as salaries for maintenance staff or contracts for equipment service, remaining constant over a period.
Machine-Hours
A unit of measure representing the operation of machinery for one hour, often used in manufacturing and production cost analysis.
- Enhance skills in determining the mean expenditure per unit for variable and fixed expenses across the applicable spectrum.
Verified Answer
AP
Andrés PalauJun 30, 2024
Final Answer :
C
Explanation :
First, we need to find the total maintenance cost at 9,300 machine-hours:
Total Maintenance Cost = Total Fixed Maintenance Cost + Total Variable Maintenance Cost
Total Maintenance Cost = $368,280 + ($390,240/9,000 machine-hours x 9,300 machine-hours)
Total Maintenance Cost = $368,280 + $405,320
Total Maintenance Cost = $773,600
Next, we need to find the average fixed maintenance cost per unit:
Average Fixed Maintenance Cost per Unit = Total Fixed Maintenance Cost ÷ Activity Level
Average Fixed Maintenance Cost per Unit = $368,280 ÷ 9,300 machine-hours
Average Fixed Maintenance Cost per Unit = $39.60
Therefore, the best choice is C.
Total Maintenance Cost = Total Fixed Maintenance Cost + Total Variable Maintenance Cost
Total Maintenance Cost = $368,280 + ($390,240/9,000 machine-hours x 9,300 machine-hours)
Total Maintenance Cost = $368,280 + $405,320
Total Maintenance Cost = $773,600
Next, we need to find the average fixed maintenance cost per unit:
Average Fixed Maintenance Cost per Unit = Total Fixed Maintenance Cost ÷ Activity Level
Average Fixed Maintenance Cost per Unit = $368,280 ÷ 9,300 machine-hours
Average Fixed Maintenance Cost per Unit = $39.60
Therefore, the best choice is C.
Learning Objectives
- Enhance skills in determining the mean expenditure per unit for variable and fixed expenses across the applicable spectrum.