Figure 4-17
X-TREME Corporation has the following activities: creating bills of materials (BOM), studying manufacturing capabilities, improving manufacturing processes, training employees, and designing tooling. The general ledger accounts reveal the following expenditures for manufacturing engineering:
The equipment is used for two activities: improving processes and designing tooling. Thirty-five percent of the equipment's time is used for improving processes and 65 percent is used for designing tools. The salaries are for two engineers. One is paid $50,000, while the other earns $25,000. The $50,000 engineer spends 40 percent of his time training employees in new processes and 60 percent of his time on improving processes. The remaining engineer spends equal time on all activities. Supplies are consumed in the following proportions:

-Refer to 4-17. What is the cost assigned to the designing tooling activity?
A) $81,250
B) $33,000
C) $25,000
D) $125,000

Question

Figure 4-17
X-TREME Corporation has the following activities: creating bills of materials (BOM), studying manufacturing capabilities, improving manufacturing processes, training employees, and designing tooling. The general ledger accounts reveal the following expenditures for manufacturing engineering:
  The equipment is used for two activities: improving processes and designing tooling. Thirty-five percent of the equipment's time is used for improving processes and 65 percent is used for designing tools. The salaries are for two engineers. One is paid $50,000, while the other earns $25,000. The $50,000 engineer spends 40 percent of his time training employees in new processes and 60 percent of his time on improving processes. The remaining engineer spends equal time on all activities. Supplies are consumed in the following proportions:
 
-Refer to 4-17. What is the cost assigned to the designing tooling activity?
A) $81,250 
B) $33,000 
C) $25,000 
D) $125,000

Quizplus · Accepted Answer

To calculate the cost assigned to designing tooling activity, we need to use the following equation:
Cost assigned = Total cost x Percentage of time spent on designing tooling x Proportion of supplies used for designing tooling
Total cost = $25,000 + $50,000 + $5,000 = $80,000 (sum of salaries, equipment, and supplies)
Percentage of time spent on designing tooling (for $50,000 engineer) = 100% - 60% = 40%
Percentage of time spent on designing tooling (for other engineer) = 25% (since he spends equal time on all activities)
Proportion of supplies used for designing tooling = 20%
Cost assigned = $80,000 x (0.65 x 20% + 0.4 x 25%) = $33,000

Figure 4-17 X-TREME Corporation Has the Following Activities: Creating Bills of Materials