Question

Runaround Corporation sells running shoes and during January they ran production machines for 29 comma 000 hours total and incurred $ 10 comma 500 in maintenance costs. During July they ran production machines for 15 comma 000 hours total and incurred $ 8 comma 600 in maintenance costs. Based on this​ data, what will total maintenance costs be if the machines are run for 18 comma 500 ​hours? (Round intermediary calculations to the nearest​ cent.)

Answer 1

$9,075

Step-by-step explanation:

As we know that:

Variable cost per hour = Cost Difference / Units Difference

Variable cost per hour = ($10,500- $8,600) / (29,000 - 15,000)

= $00.1357142857142857 per hour

Which means:

Fixed Cost = $10,500 - (29,000 * $0.0.1357142857142857 per hour)

= $6,564

The total variable cost for 18,500 hours is calculated as under:

Total Variable Cost = 18,500 Unit * $0.1357142857142857 per hour

= $2,511

Total Maintenance Costs = $6,564 + $2,511 = $9,075