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

A) £47,000
B) £43,000
C) £38,410,000
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 machine cost for production of 50,000 reflectors that will require 8,000 machine hours, 25 batches, and 15,000 purchase orders?

A) £47,000 
B) £43,000 
C) £38,410,000 
D) none of the above

Quizplus · Accepted Answer

Machine cost = (machine rate per hour x machine hours) + (batch rate x number of batches) + (purchase order rate x number of purchase orders)
Machine cost = (£4 x 8,000) + (£1,200 x 25) + (£0.20 x 15,000)
Machine cost = £32,000 + £30,000 + £3,000
Machine cost = £65,000
Cost for 50,000 reflectors = 50,000 x £1.50 = £75,000
Therefore, the machine cost for production of 50,000 reflectors is £65,000.