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:
The company expects to perform 25 setups in June. $\begin{array}{ll}
\text { Fixed costs per month } & \$ 240,000 \
\text { Variable cost per setup } & \$ 5,400
\end{array}$
-Refer to the Figure.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 for the setup activity include both fixed and variable costs. Fixed costs are $240,000. Variable costs are calculated as 25 setups * $5,400 per setup = $135,000. Total costs = $240,000 + $135,000 = $375,000.

Newby Company Uses an Activity-Based Costing System Fixed costs per month $240,000 Variable cost per setup $5,400\begin{array}{ll}\text { Fixed costs per month } & \$ 240,000 \\\text { Variable cost per setup } & \$ 5,400\end{array} Fixed costs per month Variable cost per setup ​$240,000$5,400​

Newby Company Uses an Activity-Based Costing System $\begin{array}{ll}\text { Fixed costs per month } & \$ 240,000 \\\text { Variable cost per setup } & \$ 5,400\end{array}$