Homework Answers
Cost A, is same at the two different activity levels, So Cost A is a Fixed cost
Cost B, Variable cost per unit = [$60,000 - $36,000] / [15000-9000] = $4 per Machine hour, fixed cost in it is [$60,000 - (15,000*4)] = $0. So, cost B is completely a variable cost
Cost C, Variable cost per unit = [$85,000 - $55,000] /[15,000- 9,000] = $5 per machine hour and fixed element in it is [$85,000 - ($5 * 15000)] = $10,000
Computation of Expected total costs at 12,000 machine hours.
Cost A = $66,000
Cost B = 12,000 * 4 = $48,000
Cost C = [$10,000 + ($5 * 12,000)] = $70,000
Total expected costs = $184,000
So, The total expected cost at 12,000 machine hours activity level = $184,000
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