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. Develop a cost equation for the total machine maintenance cost.
A) Y= $275,000
B) Y = $20,000
C) Y = $20,000 + $2 MHR
D) Y = $2 MHR

Question

Quizplus · Accepted Answer

The cost equation for the total machine maintenance cost is Y = $20,000 + $2 MHR, as given in the problem statement. The $20,000 is the fixed cost (depreciation) and $2 MHR is the variable cost (operating cost per machine hour). Therefore, the correct answer is choice C.

Figure 3-1 Sonor Systems Undertakes Its Own Machine Maintenance. the Depreciation on Depreciation