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. What is the total maintenance cost per unit produced?
A)$0.55
B)$4.20
C)$5.50
D)$5.70

Question

Quizplus · Accepted Answer

Total maintenance cost = Depreciation + Operating cost
Depreciation = $20,000
Operating cost = $2 x 275,000 = $550,000
Total maintenance cost = $20,000 + $550,000 = $570,000
Cost per unit = Total maintenance cost / Number of units produced
Cost per unit = $570,000 / 100,000 = $5.70
Therefore, the total maintenance cost per unit produced is $5.70.

Sonor Systems Undertakes Its Own Machine Maintenance