At an activity level of 7,900 machine-hours in a month, Manchester Corporation's total variable maintenance cost is $430,550 and its total fixed maintenance cost is $417,120.
-What would be the total variable maintenance cost at an activity level of 8,000 machine-hours in a month? Assume that this level of activity is within the relevant range.
A) $847,670
B) $422,400
C) $430,550
D) $436,000

Question

Quizplus · Accepted Answer

To find the total variable maintenance cost at an activity level of 8,000 machine-hours, we need to use the high-low method. 
Using the information given, we know that at an activity level of 7,900 machine-hours, the total variable maintenance cost is $430,550. 
Using the formula for the variable cost per machine-hour, we get:

Variable cost per machine-hour = (Total variable cost at high activity level - Total variable cost at low activity level) / (High activity level - Low activity level)

Variable cost per machine-hour = ($430,550 - $417,120) / (7,900 - 0) = $13.43

Now, we can use this variable cost per machine-hour to find the total variable maintenance cost at an activity level of 8,000 machine-hours:

Total variable maintenance cost = Variable cost per machine-hour x Activity level

Total variable maintenance cost = $13.43 x 8,000 = $107,440

Therefore, the total variable maintenance cost at an activity level of 8,000 machine-hours is $107,440. Adding this to the total fixed maintenance cost of $417,120, we get:

Total maintenance cost = Total variable maintenance cost + Total fixed maintenance cost

Total maintenance cost = $107,440 + $417,120 = $524,560

So, the answer is D) $436,000.

At an Activity Level of 7,900 Machine-Hours in a Month