1 ABC company has a maintenance cost that follows a linear e

1. ABC company has a maintenance cost that follows a linear equation: Cost S420,000+ S20 x, where x is the number of machine hours per year which could range between 24,000 and 31,000 hrs/year. Find the average maintenance cost and state its type (fixed or variable)

Solution

Average maintenance cost is 420000+(24000+31000/2)=447500

Out of this 420000 is fixed cost and (24000+31000/2=27500 is variable cost)