Question

A corporation wishes to determine the fixed portion of its maintenance expense (a semivariable expense), as measured against direct labor hours, for the first 3 months of the year. The inspection costs are fixed; the adjustments necessitated by errors found during inspection account for the variable portion of the maintenance costs. Information for the first quarter is as follows:

Direct Labor Hours Maintenance Expense
January 34,000 $610
February 31,000 $585
March 34,000 $610

Required:
What is the fixed portion of Jacob's maintenance expense, rounded to the nearest dollar?

a. $283
b. $327
c. $258
d. $541

Answer 1

b. $327

Step-by-step explanation:

The computation of the fixed portion is shown below:

But before that variable maintenance expense per direct labor is

= ($610 - $585) ÷ (34000 hours - 31000 hours)

= $0.00833 per direct labor hour

Now

Total variable expense for 34,000 hours is

= $0.00833 × 34000

= $283

And, finally Fixed portion is

= $610 - $283

= $327