Question

Pinnacle corporation is a manufacturing company operating numerous machines. these require regular maintenance to keep them operational. the fixed portion of maintenance costs are $3,000 per month. maintenance costs are also incurred at the rate of $5 per setup and $0.50 per unit produced. the company produced 23,000 units in 800 batches during a particular month. what will be the total cost of maintenance for this month?

Answer 1

The total cost of the month will consist of the fixed and variable components. The variable cost is: $23,000 x 0.5 + [5 x (23,000/800)] = 11,500 + 143.75 = $11,643.75. The total cost will therefore be $3,000 + 11,643.75 = $14,643.75. A brief explanation. The variable cost consists of the maintenance cost per unit plus the setup cost for every batch. There's a total of 28.75 (23000/800) costing each $5. We then combine both variable costs and add to fixed cost to arrive at the total cost for the month.