Question

At an activity level of 9,400 machine-hours in a month, Falks Corporation’s total variable production engineering cost is $828,140 and its total fixed production engineering cost is $222,300. What would be the total production engineering cost per machine-hour, both fixed and variable, at an activity level of 9,500 machine-hours in a month? Assume that this level of activity is within the relevant range. (Round intermediate calculations to 2 decimal places.)

Answer 1

At an activity level of 9,500 machine-hours, the total production engineering cost per machine-hour would be $104.19.

Step-by-step explanation:

To calculate the total production engineering cost per machine-hour, we need to divide the total cost by the number of machine-hours. The total variable production engineering cost is $828,140 and the total fixed production engineering cost is $222,300.

At an activity level of 9,400 machine-hours, the total production engineering cost per machine-hour is:

Total Cost / Machine-hours = $828,140 + $222,300 / 9,400 = $105.30 per machine-hour.

Using the same formula, at an activity level of 9,500 machine-hours, the total production engineering cost per machine-hour would be:

Total Cost / Machine-hours = $828,140 + $222,300 / 9,500 = $104.19 per machine-hour.

Answer 2

Total cost per machine hour at activity level of 9,500 hours = $88.10 + $23.40 = $111.50

Step-by-step explanation:

Provided that,

At activity level of 9,400 machine hours

Variable production cost = $828,140

Total fixed cost = $222,300

At an activity level of 9,500 machine hours, provided it is in same range, therefore, as fixed cost will remain same, but variable cost will increase as the activity is increased by 100 hours, but rate per hour will remain same.

Revised variable cost =
`(828,140)/(9,400) = $88.10`

= $88.10
`*` 9,500 machine hours = $836,950

Fixed cost will be same as before = $222,300

Total cost per machine hour variable = $88.10

Fixed cost per machine hour = $222,300/9,500 = $23.4

Total cost per machine hour at activity level of 9,500 hours = $88.10 + $23.40 = $111.50