Solo Company has developed cost formulas for the drivers of the following production activities: $\begin{array}{llcc}\text { Driver } & \text { Activity } & \text { Fixed} & \text { Variable }\
\text { Labour hours } & \text { Materials } & -0- & 40 \
\text { Labour hours } & \text { Labour } & -0- & 20 \
\text { Machine hours } & \text { Maintenance } & 20,000 & 16 \
\text { Machine hours } & \text { Machining } & 100,000 & 4 \
\text { Number of setups } & \text { Inspections } & 60,000 & 400 \
\text { Number of setups } & \text { Setups } & -0- & 600 \
\text { Number of purchase orders } & \text { Purchasing } & 150,000 & 6
\end{array}$ What is the budgeted inspection cost for 20 setups?
A) $60,000
B) $68,000
C) $160,000
D) $330,000

Question

Solo Company has developed cost formulas for the drivers of the following production activities: $\begin{array}{llcc}\text { Driver } & \text { Activity } & \text { Fixed} & \text {  Variable }\
\text { Labour hours } & \text { Materials } & -0- & 40 \
\text { Labour hours } & \text { Labour } & -0- & 20 \
\text { Machine hours } & \text { Maintenance } & 20,000 & 16 \
\text { Machine hours } & \text { Machining } & 100,000 & 4 \
\text { Number of setups } & \text { Inspections } & 60,000 & 400 \
\text { Number of setups } & \text { Setups } & -0- & 600 \
\text { Number of purchase orders } & \text { Purchasing } & 150,000 & 6
\end{array}$ What is the budgeted inspection cost for 20 setups?
A) $60,000
B) $68,000
C) $160,000
D) $330,000

Quizplus · Accepted Answer

The budgeted inspection cost is calculated by adding the fixed cost to the variable cost per setup multiplied by the number of setups: $60,000 + ($400 * 20) = $68,000.

Solo Company Has Developed Cost Formulas for the Drivers of the Following