Question

sed COVID 19 Co produces two different products (Product Y and Product B) 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 Product uses 20% of total machine hours and 75% of total batches What is the total Machining cost assigned to 1.50 tion Product Y> Select one a $100,000 b. $375.000 C $22.500 d $7.500

Answer 1

The company produces two products namely product Y and product B using two different activities.

ACTIVITY	ACTIVITY DRIVER
Machining	Machine hours
Inspection	Number of batches

Total cost of Machining = $ 500,000.

Total cost of Inspection = $ 30,000.

It is given that the product Y uses 20 % of total Machine hours and 75 % of total Batches.

We are required to calculate the total machining cost assigned to product Y.

Total cost of Machining = $ 500,000.

Cost of Machining assigned to product Y = 500,000 x 20 %

Cost of Machining assigned to Y = $ 100,000.

Hence, option A is the correct answer.

SUMMARY:

Total cost of Machining = $ 500,000.

Proruct Y uses 20 % of this total machining and balance 80 % is used by the product B.

Cost assigned to B = 500,000 x 80%

Cost assigned to B = $ 400,000.

Cost assigned to Y = 500,000 x 20%

Cost assigned to Y = $ 100,000.

Hence, option A is the correct answer.