Erkkila Incorporated Reports That at an Activity Level of 6,600

question 324

Multiple Choice

Erkkila Incorporated reports that at an activity level of 6,600 machine-hours in a month, its total variable inspection cost is $426,230 and its total fixed inspection cost is $188,301.What would be the average fixed inspection cost per unit at an activity level of 6,900 machine-hours in a month? Assume that this level of activity is within the relevant range.

• A) $93.11
• B) $28.53
• C) $37.29
• D) $27.29

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Definitions:

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity level.

Manufacturing Costs

The total expense involved in the manufacturing process, including direct materials, direct labor, and overhead costs.

Variable Costs

Variable costs are expenses that change directly and proportionally with the level of production or business activity, such as raw materials and direct labor costs.

Direct Materials

Raw materials that are directly incorporated into a final product and can be easily traced to it.