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 setup costs 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 setup costs 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

Setup cost = (Number of setups/batches x setup cost per batch) + (Number of purchase orders x setup cost per purchase order)
Number of setups/batches = 25
Setup cost per batch = $1,000
Number of purchase orders = 15,000
Setup cost per purchase order = $1
Total setup cost = (25 x $1,000) + (15,000 x $1) = $25,000