Erkkila Inc. reports that at an activity level of 6,400 machine-hours in a month, its total variable inspection cost is $423,680 and its total fixed inspection cost is $154,368. What would be the average fixed inspection cost per unit at an activity level of 6,700 machine-hours in a month? Assume that this level of activity is within the relevant range.
A)$23.04
B)$90.32
C)$24.12
D)$45.83

Question

Quizplus · Accepted Answer

The average fixed inspection cost per unit is calculated by dividing the total fixed inspection cost by the activity level. At an activity level of 6,700 machine-hours, the average fixed inspection cost per unit would be $154,368 / 6,700 = $23.04.