Question

Cottonwood, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard uses 30% of total machine hours and 70% of total batches. What is the total activity cost assigned to Standard?

Answer 1

Answer :- Calculation of total activity cost assigned to Standard

Total activity cost assigned to Standard =

= ( 30% *$500,000 + 70% * $30,000)

= $150,000 + $21,000

= $171,000

So the correct answer is option B.( $171,000)

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