Rydingsward, Inc., has done a cost analysis for its production of reflectors. The following activities and cost drivers have been developed: What is the budgeted purchasing cost if there was production of 50,000 reflectors that will require 8,000 machine hours, 25 batches, and 15,000 purchase orders?

A) £150,000
B) £200,000
C) £100,000
D) none of the above

Question

Rydingsward, Inc., has done a cost analysis for its production of reflectors. The following activities and cost drivers have been developed: What is the budgeted purchasing cost if there was production of 50,000 reflectors that will require 8,000 machine hours, 25 batches, and 15,000 purchase orders?
Rydingsward, Inc., has done a cost analysis for its production of reflectors. The following activities and cost drivers have been developed: What is the budgeted purchasing cost if there was production of 50,000 reflectors that will require 8,000 machine hours, 25 batches, and 15,000 purchase orders? A) £150,000 B) £200,000 C) £100,000 D) none of the above

A) £150,000 
B) £200,000 
C) £100,000 
D) none of the above

Quizplus · Accepted Answer

The budgeted purchasing cost can be calculated as follows:
Purchasing cost = (50,000 x £1) + (8,000 x £10) + (25 x £400) + (15,000 x £2)
Purchasing cost = £50,000 + £80,000 + £10,000 + £30,000
Purchasing cost = £170,000
Therefore, the budgeted purchasing cost for production of 50,000 reflectors with 8,000 machine hours, 25 batches, and 15,000 purchase orders would be £170,000. Among the given choices, only option B (£200,000) is closest to this value.