Average maintenance costs are $1.50 per machine-hour at an activity level of 8,000 machine-hours and $1.20 per machine-hour at an activity level of 13,000 machine-hours.Assuming that this activity is within the relevant range,total expected maintenance cost for a budgeted activity level of 10,000 machine-hours would be closest to:
A)$16,128
B)$15,000
C)$13,440
D)$11,433

Question

Quizplus · Accepted Answer

Average maintenance cost = Total maintenance cost F1F1F1S1F1F1F10 Total activity
 11eaa48f_7c06_2f61_9e4a_8d9f8b46cbdc_TB2485_00 Variable cost = Change in cost F1F1F1S1F1F1F10 Change in activity
= ($15,600 - $12,000)F1F1F1S1F1F1F10 (13,000 machine-hours - 8,000 machine hours)
= $3,600 F1F1F1S1F1F1F10 5,000 machine-hours
= $0.72 per machine-hour
Total fixed cost = Total cost - Total variable cost
= $15,600 - ($0.72 per machine-hour F1F1F1S1F1F1F10 13,000 machine-hours)
= $15,600 - $9,360
= $6,240
Total cost = Total fixed cost + Total variable cost
= $6,240 + $0.72 per machine-hour F1F1F1S1F1F1F10 10,000 machine-hours
= $6,240 + $7,200
= $13,440

Average Maintenance Costs Are $1