At an activity level of 8700 machine-hours in a month, Falks Corporation's total variable production engineering cost is $728,190 and its total fixed production engineering cost is $232,290. What would be the total production engineering cost per machine-hour, both fixed and variable, at an activity level of 8900 machine-hours in a month? Assume that this level of activity is within the relevant range. (Round intermediate calculations to 2 decimal places.)

$109.80 per unit

Explanation:

For we to be able to calculate the or solve the problem, we are to use the following method

Firstly

Variable cost per unit = $728,190 ÷ 8,700 units

Variable cost per unit = $83.70 per unit

Secondly

Fixed cost per unit at 8,900 units = $232,290 ÷ 8,900 units

Fixed cost per unit = $26.10 per unit

Lastly

Total cost = Variable cost + Fixed cost

Which we have as;

Total cost = $83.70 per unit + $26.10 per unit

Total cost = $109.80 per unit

Total cost = $977,220

Explanation:

Variable cost.

They vary with volume of activity

Variable cost per machine hour = Total variable cost/machine hours

VC per machine hour = 728,190 /8700= $83.7 per machine hour

Fixed cost of maintenance

The fixed costs are cost that remain the same within an activity. The don't vary with volume withing an activity range.

Fixed costs =$232,290.

Total cost at 8,900 hours

= variable cost + fixed cost

= ($83.7  × 8900)  + $232,290.

Total cost = $977,220

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