Figure 3-1 ALF 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.
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See Figure 3-1.Develop a cost equation for the total machine maintenance cost.
A) Y= $275,000
B) Y = $20,000
C) Y = $20,000 + $2 MHR
D) Y = $2 MHR

Question

Quizplus · Accepted Answer

The cost equation for total machine maintenance cost is the sum of depreciation and operating cost, which is Y = $20,000 + $2 MHR.

Figure 3-1 ALF Systems Undertakes Its Own Machine Maintenance