Figure 3-1 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.
See Figure 3-1. 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, and the operating cost is $2 per machine hour for 275,000 hours, which totals $550,000. Adding these gives $570,000.

Figure 3-1 Sonor Systems Undertakes Its Own Machine Maintenance