Jumpst Corporation uses the cost formula Y = $5,200 + $0.40X for the maintenance cost in Department B, where X is machine-hours. The August budget is based on 36,000 hours of planned machine time. Maintenance cost expected to be incurred during August is: Multiple Choice $14,625 $14,400 $5,200 $19,600

Jumpst Corporation

Maintenance cost expected to be incurred during August is:

= $19,600

Explanation:

a) Data and Calculations:

Cost formula Y = $5,200 + $0.40X

where X = machine-hours

Y = Expected maintenance cost

August budgeted machine hours = 36,000

Therefore, Y = $5,200 + ($0.40 * 36,000)

= $5,200 + $14,400

= $19,600

b) From the cost formula, one can summarize that the $5,200 is a fixed cost while the $0.40X is the variable cost element.  Together, these two elements make up the total cost for the Maintenance cost for any month, where X represents the value of machine hours expected to be used in the month.

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