Erkkila Inc. reports that at an activity level of 7,300 machine-hours in a month, its total variable inspection cost is $425,030 and its total fixed inspection cost is $192,204. What would be the average fixed inspection cost per unit at an activity level of 7,600 machine-hours in a month? Assume that this level of activity is within the relevant range.

$25.29 per machine hours

Explanation:

Data provided

Total fixed inspection cost = $192,204

Total activity = 7,600 machine hours

The computation of Average fixed inspection cost is shown below:-

Average fixed inspection cost = Total fixed inspection cost ÷ Total activity

= $192,204 ÷ 7,600 machine hours

= $25.29 per machine hours

Therefore for computing the average fixed inspection cost we simply divide the total fixed inspection cost by total activity

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