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

Quizplus · Accepted Answer

The machining cost can be calculated as follows:
Machining cost = (Machining rate per hour x Number of machine hours) + (Batch cost x Number of batches) + (Purchase order cost x Number of purchase orders)
Machining rate per hour = $25 (given)
Batch cost = $1,500 (given)
Purchase order cost = $200 (given)

Substituting the given values, we get:
Machining cost = ($25 x 8,000) + ($1,500 x 25) + ($200 x 15,000)
Machining cost = $200,000 + $37,500 + $3,000,000
Machining cost = $3,237,500

Therefore, the machining cost for production of 50,000 reflectors is $3,237,500, which is closest to option A ($393,750).