Figure 4-17 Moss Corporation has the following activities: creating bills of materials (BOM), studying manufacturing capabilities, improving manufacturing processes, training employees, and designing tooling.The general ledger accounts reveal the following expenditures for manufacturing engineering:
The equipment is used for two activities: improving processes and designing tooling.Thirty-five percent of the equipment's time is used for improving processes and 65 percent is used for designing tools.The salaries are for two engineers.One is paid $50,000, while the other earns $25,000.The $50,000 engineer spends 40 percent of his time training employees in new processes and 60 percent of his time on improving processes.The remaining engineer spends equal time on all activities.Supplies are consumed in the following proportions:

-Refer to Figure 4-17.What is the cost assigned to the creating BOMs activity?
A) $31,250
B) $7,500
C) $43,750
D) $125,000

Question

Figure 4-17 Moss Corporation has the following activities: creating bills of materials (BOM), studying manufacturing capabilities, improving manufacturing processes, training employees, and designing tooling.The general ledger accounts reveal the following expenditures for manufacturing engineering:
 The equipment is used for two activities: improving processes and designing tooling.Thirty-five percent of the equipment's time is used for improving processes and 65 percent is used for designing tools.The salaries are for two engineers.One is paid $50,000, while the other earns $25,000.The $50,000 engineer spends 40 percent of his time training employees in new processes and 60 percent of his time on improving processes.The remaining engineer spends equal time on all activities.Supplies are consumed in the following proportions:
 
-Refer to Figure 4-17.What is the cost assigned to the creating BOMs activity?
A) $31,250 
B) $7,500 
C) $43,750 
D) $125,000

Quizplus · Accepted Answer

To calculate the cost assigned to creating BOM activity, we need to use the following formula:

Total cost of manufacturing engineering * Proportion of supplies used for creating BOM activity

Total cost of manufacturing engineering = Equipment + Salaries + Supplies
= $120,000 + ($50,000 + $25,000) + ($7,500 + $22,500 + $15,000)
= $220,000

Proportion of supplies used for creating BOM activity = 30%
= 0.3

Cost assigned to creating BOM activity = $220,000 * 0.3
= $66,000

However, we are only interested in the supplies used for creating BOM activity, which is 15% of the total supplies, so:

Cost assigned to creating BOM activity = $66,000 * 0.15
= $7,500

Therefore, the answer is B, $7,500.

Figure 4-17 Moss Corporation Has the Following Activities: Creating Bills