Average fixed inspection cost per unit, Accounting Basics

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Average fixed inspection cost per unit

Problem:

Erkkila Inc. reports that at an activity level of 6,700 machine-hours in a month, its total variable inspection cost is $424,130 and its total fixed inspection cost is $166,530.

Required:

Question: What would be the average fixed inspection cost per unit at an activity level of 7,000 machine-hours in a month? Assume that this level of activity is within the relevant range.

A $23.79

B $88.16

C $24.86

D $38.45

Note: Please show the work not just the answer.

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Accounting Basics: Average fixed inspection cost per unit

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Accounting Basics: Average fixed inspection cost per unit

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