The Blaine Company 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 variable cost per setup for utilities is most likely closest to

Question

Quizplus · Accepted Answer

The variable cost per setup for utilities is £8.00. This can be calculated by dividing the difference in utility costs between the two activity levels by the difference in activity levels.

The Blaine Company Is a Highly Automated Manufacturer