At an activity level of 8,700 machine-hours in a month, Falks Corporation’s total variable production engineering cost is $728,190 and its total fixed production engineering cost is $232,290. What would be the total production engineering cost per machine-hour, both fixed and variable, at an activity level of 8,900 machine-hours in a month? Assume that this level of activity is within the relevant range. (Round intermediate calculations to 2 decimal places.)
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
At an activity level of 8,700 machine-hours in a month, Falks Corporation’s total variable production engineering cost is $728,190 and its total fixed production engineering cost is $232,290. What would be the total production engineering cost per machine-hour, both fixed and variable, at an activity level of 8,900 machine-hours in a month? Assume that this level of activity is within the relevant range. (Round intermediate calculations to 2 decimal places.)
Variable production engineering cost per hour = Total variable production engineering cost / Total hours
= $728,190 / 8,700 machine-hours
= $83.70 per hour
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