Newby Company
Newby Company uses an activity-based costing system. Four activities have been identified. The setup activity uses the number of setups as its cost driver. The following budget information is available for this activity: $\begin{array}{ll}
\text { Fixed costs per month } & \$ 240,000 \
\text { Variable cost per setup } & \$ 5,400
\end{array}$ The company expects to perform 25 setups in June.
-Refer to Newby Company. Suppose the company expects 25 setups in June. What would be the total budgeted costs of the setup activity?
A) $135,000
B) $240,000
C) $375,000
D) $397,500

Question

Quizplus · Accepted Answer

The total budgeted costs of the setup activity include both fixed and variable costs. Fixed costs are $240,000. Variable costs are $5,400 per setup for 25 setups, totaling $135,000. The total cost is $240,000 + $135,000 = $375,000.