Sonor Systems undertakes its own machine maintenance. The depreciation on the equipment is $20,000 per year and operating cost is $2 per machine hour. Last year 275,000 machine hours were used to produce 100,000 units. Compute the total machine maintenance cost for last year.
A)$570,000
B)$550,000
C)$420,000
D)$20,000

Question

Quizplus · Accepted Answer

The total machine maintenance cost includes both the depreciation and the operating cost. Depreciation is $20,000 per year, and the operating cost is $2 per machine hour for 275,000 machine hours. Therefore, the total cost is $20,000 (depreciation) + $2 * 275,000 (operating cost) = $20,000 + $550,000 = $570,000.

Sonor Systems Undertakes Its Own Machine Maintenance