Question

Sitwell Corporation manufactures titanium and aluminum tennis racquets. Sitwell's total overhead costs consist of assembly costs and inspection costs. The Following information is available:

Cost                     Titanium                                   Aluminum                                    Total Cost

Assembly            500 machine hours                        500 machine hours                      $45,000

Inspections              350                                                150                                            $75,000

                           2,100 labor hours                            1,900 labor hours

Stilwell is considering switching from one overhead rate based on labor hours to activity-based costing.

Using activity-based costing, how much inspections cost is assigned to titanium racquets?

A) $35,625           B) $52,500                                 C) $22,500                 D) $37,500

Answer 1

Therefore, the correct choice is (B) $52,500.

Schedule showing the calculation of overhead rate of assembly and inspection departments: Departments Assembly Machine Hours MH) Inspections Number of Inspections (NOI Total cost Overhead Rate TitaniumAluminumTotal (b) 500 MH | 350 NOI | Activity Driver $45.0001 $75.000! 500 MH | 1.000 MH 150 NOII 500 NOI $150 Schedule showing allocation of overheads based on activity drivers: Departments Assembly Machine Hours (MH) Activitv Driver TitaniumAluminumTotal S22.500S22.500S45.000 500x $45500x $45 Inspections Number of Inspections (NOI) S52.500S22.500S75.000 350x$150 150x$150