What would be the average fixed maintenance cost per unit at an activity level of 8,600 machine-hours in a month? Assume that this level of activity is within the relevant range.
A)$93.64
B)$67.08
C)$64.74
D)$75.15

Question

Quizplus · Accepted Answer

Since we are given only the fixed maintenance cost we can assume it to be a fixed cost. The fixed costs are constant within the relevant range of production. The given activity level of 8,600 machine-hours in a month is within the relevant range, hence the fixed maintenance cost would remain constant at this level. Therefore, the average fixed maintenance cost per unit would be the total fixed maintenance cost divided by the number of units produced. However, the number of units produced is not given. Therefore, we cannot determine the average fixed maintenance cost per unit. We can only determine the total fixed maintenance cost.
Hence, the correct answer is the total fixed maintenance cost, which is $64.74 as per option C.

What Would Be the Average Fixed Maintenance Cost Per Unit