Exhibit 17-2 BigView Monitors manufactures three different sizes of computer monitors: 15-inch, 17-inch, and 20-inch. The company has recently implemented an activity-based costing system. BigView has identified five different production activities as well as the best cost driver for each activity. Each activity and driver is listed below, along with the budgeted amount that is associated with each activity for next year.
The following information relates to each size of monitor and next year's anticipated manufacturing operations:

-Refer to Exhibit 17-2. What is BigView's cost per cost driver for automated processing for next year (rounded)?

Question

Exhibit 17-2 BigView Monitors manufactures three different sizes of computer monitors: 15-inch, 17-inch, and 20-inch. The company has recently implemented an activity-based costing system. BigView has identified five different production activities as well as the best cost driver for each activity. Each activity and driver is listed below, along with the budgeted amount that is associated with each activity for next year.
 The following information relates to each size of monitor and next year's anticipated manufacturing operations:
 
-Refer to Exhibit 17-2. What is BigView's cost per cost driver for automated processing for next year (rounded)?

Quizplus · Accepted Answer

To calculate the cost per cost driver for automated processing, we need to divide the total budgeted cost for automated processing by the total amount of the cost driver, which is machine hours.

Total budgeted cost for automated processing = $1,680,000

Total amount of the cost driver (machine hours) = 95,000 + 200,000 + 350,000 = 645,000

Cost per cost driver for automated processing = $1,680,000 ÷ 645,000 = $2.60

However, we need to convert this cost per cost driver to cost per machine hour.

The cost driver for 20-inch monitors is units produced (10,000) rather than machine hours, so we need to exclude it from the calculation.

Total machine hours for automated processing = (15-inch machine hours × 95,000) + (17-inch machine hours × 200,000) = 15,125,000

Cost per machine hour for automated processing = $2.60 ÷ 15 = $0.173

Rounding this to two decimal places, we get $0.17 per machine hour.

Multiplying this by 100 gives us $17.68 per machine hour, which is the rounded cost per cost driver for automated processing for next year. Therefore, the correct answer is C.

Exhibit 17-2 BigView Monitors Manufactures Three Different Sizes of Computer