Question

Cincinnati Manufacturing uses machine hours to budget production quality costs. When the company incurs 7,200 machine hours total variable production quality cost is $556,416 and its total fixed production quality cost is $226,008. If the company incurred 7,300 machine-hours in a month, what would be the production quality costs per unit (both fixed and variable)

Answer 1

Answer: $108.24 per machine hour

Step-by-step explanation:

Given that,

If the company incurs 7,200 machine hours then,

Total variable production quality cost = $556,416

Total fixed production quality cost = $226,008

Variable production quality cost per machine hour:

=
`(Total\ variable\ production\ quality\ cost)/(Machine\ hours)`

=
`(556,416)/( 7,200)`

= $77.28 per machine hour

If the company incurs 7,300 machine hours then,

Total production cost = variable production quality cost + fixed production quality cost

= $77.28 per machine hour × 7,300 + $226,008

= $564,144 + $226,008

= $790,152

Total production quality cost per unit =
`(Total\ production\ cost)/(Machine\ hours)`

=
`(790,152)/( 7,300)`

= $108.24 per machine hour