The Blaine Corporation is a highly automated manufacturer. At an activity level of 6,000 machine setups, total overhead costs equal $240,000. Of this amount, depreciation totals $80,000 (all fixed) and lubrication totals $72,000 (all variable). The remaining $88,000 of the total overhead cost consists of utility cost (mixed). At an activity level of 9,000 setups, utility cost totals $112,000.Assume that the relevant range includes all of the activity levels mentioned in this problem.The total fixed overhead costs for Blaine Corporation are most likely closest to:

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Quizplus · Accepted Answer

The fixed overhead costs include the fixed portion of the utility cost and the depreciation. Depreciation is $80,000. To find the fixed portion of the utility cost, we calculate the variable cost per setup: ($112,000 - $88,000) / (9,000 - 6,000) = $8 per setup. At 6,000 setups, the variable portion of the utility cost is 6,000 * $8 = $48,000. Therefore, the fixed portion of the utility cost is $88,000 - $48,000 = $40,000. Total fixed overhead costs are $80,000 (depreciation) + $40,000 (fixed utility) = $120,000.

The Blaine Corporation Is a Highly Automated Manufacturer