Priestly Company uses activity-based costing.The company is trying to estimate the costs of the processing activity in the factory.The company has developed the following flexible budget formula: Y = $10.50X + $13,000
Where: Y = Total processing cost per quarter and X = Number of machine hours
If 10,000 machine hours are used next quarter,total variable costs are ________ and total fixed costs are ________.
A)$105,000; $13,000
B)$105,000; $130,000,000
C)$113,000; $130,000,000
D)$10.50; $13,000

Question

Quizplus · Accepted Answer

Using the given formula, we can calculate the total processing cost as follows:
Y = $10.50X + $13,000
Y = $10.50(10,000) + $13,000
Y = $105,000 + $13,000
Y = $118,000
Therefore, the total variable costs are $105,000 (which is the product of variable cost per machine hour and the number of machine hours used), and the total fixed costs are $13,000 (which is the fixed cost component in the formula).

Priestly Company Uses Activity-Based Costing