What Would Be the Average Fixed Inspection Cost Per Unit

question 40

Multiple Choice

What would be the average fixed inspection cost per unit at an activity level of 2,400 machine-hours in a month? Assume that this level of activity is within the relevant range.

• A) $37.58
• B) $4.32
• C) $15.23
• D) $3.78

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Definitions:

Average Total Cost

The overall expense of manufacturing, when dispersed across the number of products made, encompassing both constant and fluctuating expenses.

Average Variable Cost

The sum of all costs that fluctuate with production volume, divided by the total amount of goods produced.

Long Run

A period in which all factors of production and costs are variable, allowing for full adjustment to changes.

Variable Factors

Inputs to production that can be adjusted in the short term, such as labor and raw materials.