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. If 300,000 machine hours had been worked last year, what would be the total machine maintenance cost?
A) $600,000
B) $620,000
C) $420,000
D) $220,000

Question

Quizplus · Accepted Answer

First, we need to calculate the total maintenance cost for 275,000 machine hours:

Total maintenance cost = Depreciation + Operating cost per machine hour x Total machine hours used
Total maintenance cost = $20,000 + $2 x 275,000
Total maintenance cost = $20,000 + $550,000
Total maintenance cost = $570,000

Next, we can use this formula to calculate the total maintenance cost for 300,000 machine hours:

Total maintenance cost = Depreciation + Operating cost per machine hour x Total machine hours used
Total maintenance cost = $20,000 + $2 x 300,000
Total maintenance cost = $20,000 + $600,000
Total maintenance cost = $620,000

Therefore, the total machine maintenance cost for 300,000 machine hours would be $620,000, and the best choice is B.

Figure 3-1 Sonor Systems Undertakes Its Own Machine Maintenance