Figure 3-1 Sonor Systems Undertakes Its Own Machine Maintenance

question 6

Multiple Choice

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. What is the total maintenance cost per unit produced?

• A) $0.55
• B) $4.20
• C) $5.50
• D) $5.70

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Definitions:

Price Elasticity

An index showing the degree to which demand for an item adjusts in response to its price changes.

Midpoint Method

A technique used in economics to measure the elasticity of a variable by averaging the starting and ending points.

Price Elasticity

A measure indicating how much the quantity demanded of a good or service changes in response to a change in its price.

Midpoint Method

A technique used in economics to calculate the elasticity of a variable, using the average of initial and final values as reference points.