Question

At an activity level of 8,400 machine-hours in a month, Falks Corporation’s total variable production engineering cost is $732,480 and its total fixed production engineering cost is $180,400. What would be the total production engineering cost per machine-hour, both fixed and variable, at an activity level of 8,800 machine-hours in a month? Assume that this level of activity is within the relevant range.

Answer 1

The right response is "$107.7".

Step-by-step explanation:

The given values are:

Total variable production eng. cost

= $732,480

Total fixed production eng. cost

= $180,400

Now,

Variable cost per machine hour will be:

=
`(732,480)/(8,400)`

=
`87.2` ($)

Fixed cost per unit will be:

=
`(180,400)/(8,800)`

=
`20.5` ($)

hence,

Total production cost will be:

=
`Total \ variable \ production \ eng. \ cost+Fixed \ cost`

On substituting the values, we get

=
`87.2+20.5`

=
`107.7` ($)