When the Frame Factory Is Producing 1,500 Frames, Total Cost

question 138

Multiple Choice

When the Frame Factory is producing 1,500 frames, total cost is $225,000 and variable cost is $180,000. What is average fixed cost at 1,500 units?

• A) $30
• B) $150
• C) $45,000
• D) $225,000

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Definitions:

Operating Expenses

Costs associated with the day-to-day functions of a business, excluding cost of goods sold.

Machine-Hours

A measure of production time used, indicating the number of hours machines are operated in the manufacturing process.

Maintenance Costs

Expenses associated with the routine care and preservation of assets to keep them in operational condition.

Variable Operating Expense

Expenses that fluctuate in proportion to the amount of production or the volume of sales.