At an activity level of 9,300 machine-hours in a month, Falks Corporation's total variable production engineering cost is $766,320 and its total fixed production engineering cost is $191,040. What would be the total production engineering cost per machine-hour, both fixed and variable, at an activity level of 9,600 machine-hours in a month? Assume that this level of activity is within the relevant range. (Round intermediate calculations to 2 decimal places.)
A) $99.73
B) $102.94
C) $102.30
D) $100.10

Question

Quizplus · Accepted Answer

First, we need to calculate the variable cost per machine-hour. 
Variable cost per machine-hour = Total variable cost / Total machine-hours 
Variable cost per machine-hour = $766,320 / 9,300 machine-hours = $82.32

Next, we need to calculate the total production engineering cost at an activity level of 9,600 machine-hours using the high-low method. 
Variable cost = Variable cost per machine-hour x Number of machine-hours 
Variable cost at 9,300 machine-hours = $82.32 x 9,300 = $765,576 
Variable cost at 9,600 machine-hours = $82.32 x 9,600 = $790,272 
Change in variable cost = $790,272 - $765,576 = $24,696

Fixed cost = Total cost - Variable cost 
Fixed cost at 9,300 machine-hours = $191,040 
Total cost at 9,300 machine-hours = $191,040 + $766,320 = $957,360 
Fixed cost per machine-hour = Fixed cost / Number of machine-hours 
Fixed cost per machine-hour = $191,040 / 9,300 = $20.55 
Fixed cost at 9,600 machine-hours = Fixed cost per machine-hour x Number of machine-hours 
Fixed cost at 9,600 machine-hours = $20.55 x 9,600 = $197,280

Total production engineering cost = Variable cost + Fixed cost 
Total production engineering cost at 9,600 machine-hours = $790,272 + $197,280 = $987,552 
Total cost per machine-hour = Total production engineering cost / Number of machine-hours 
Total cost per machine-hour = $987,552 / 9,600 = $102.30

Therefore, the total production engineering cost per machine-hour, both fixed and variable, at an activity level of 9,600 machine-hours in a month is $102.30. The correct answer is C.

At an Activity Level of 9,300 Machine-Hours in a Month