Mattison Company has developed cost formulas for the drivers of the following production activities: $$\begin{array} { l l r }
{ \text { Driver } } & \text { Activity } & \text { Fixed }& \text { Variable } \
\hline \text { Labor hours } & \text { Materials } & \$ 0&\$20\
\text { Labor hours } & \text { Labor } & 0 &10\
\text { Machine hours } & \text { Maintenance } & 10,000&8 \
\text { Machine hours } & \text { Machining } & 50,000&2 \
\text { Number of setups } & \text { Inspections } & 30,000&200 \
\text { Number of setups } & \text { Setups } & 0 &300\
\text { Number of purchase orders } & \text { Purchasing } & 75,000&3
\end{array}$$ The budgeted inspection cost for 20 setups is
A)$34,000.
B)$40,000.
C)$175,860.
D)$30,000.

Question

Mattison Company has developed cost formulas for the drivers of the following production activities: $$\begin{array} { l l r } 
 { \text { Driver } } & \text { Activity } & \text { Fixed }& \text { Variable } \
\hline \text { Labor hours } & \text { Materials } & \$ 0&\$20\
\text { Labor hours } & \text { Labor } & 0 &10\
\text { Machine hours } & \text { Maintenance } & 10,000&8 \
\text { Machine hours } & \text { Machining } & 50,000&2 \
\text { Number of setups } & \text { Inspections } & 30,000&200 \
\text { Number of setups } & \text { Setups } & 0 &300\
\text { Number of purchase orders } & \text { Purchasing } & 75,000&3
\end{array}$$ The budgeted inspection cost for 20 setups is
A)$34,000.
B)$40,000.
C)$175,860.
D)$30,000.

Quizplus · Accepted Answer

The budgeted inspection cost for 20 setups is calculated by adding the fixed cost to the variable cost multiplied by the number of setups. The fixed cost for inspections is $30,000, and the variable cost is $200 per setup. For 20 setups, the variable cost is $200 * 20 = $4,000. Therefore, the total budgeted inspection cost is $30,000 (fixed) + $4,000 (variable) = $34,000.

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