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 maintenance cost if there was production of 50,000 reflectors that will require 8,000 machine hours, 25 batches, and 15,000 purchase orders?

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 maintenance cost if there was production of 50,000 reflectors that will require 8,000 machine hours, 25 batches, and 15,000 purchase orders?

Quizplus · Accepted Answer

Using the cost drivers provided, we can calculate the total cost for each activity:

- Maintenance: $1.50 per machine hour x 8,000 machine hours = $12,000
- Batch setup: $500 per batch x 25 batches = $12,500
- Purchase order processing: $1 per purchase order x 15,000 purchase orders = $15,000

The total cost for all three activities is $39,500. Therefore, the budgeted maintenance cost for the production of 50,000 reflectors would be:

$12,000/8,000 machine hours x 50,000 machine hours = $75,000

Since $75,000 is not provided as an answer option, we need to subtract the other two activities from the total cost:

$39,500 - $12,500 - $15,000 = $12,000

Therefore, the budgeted maintenance cost would be $12,000, which is answer option C.