Green, Inc., has identified the following overhead costs and activity drivers for next year: The following are two of the jobs completed during the year:
The company's normal activity is 2,000 direct labour hours.
If the number of setups is used to assign setup costs, the amount of setup costs assigned to Job 10A would be

A) £1,600.
B) £1,000.
C) £800.
D) £1,680.

Question

Green, Inc., has identified the following overhead costs and activity drivers for next year: The following are two of the jobs completed during the year:
 The company's normal activity is 2,000 direct labour hours.
If the number of setups is used to assign setup costs, the amount of setup costs assigned to Job 10A would be

A) £1,600. 
B) £1,000. 
C) £800. 
D) £1,680.

Quizplus · Accepted Answer

The amount of setup costs assigned to Job 10A can be calculated as follows:
Setup cost per setup = Total setup costs / Total number of setups
= £8,000 / 16 setups
= £500 per setup
Number of setups for Job 10A = 2
Setup costs assigned to Job 10A = £500 x 2 = £1,000. Therefore, the best choice is option B (£1,000).