Walterboro, Inc., has done a cost analysis for its production of decals. The following activities and cost drivers have been developed: Activity Cost Formula
Maintenance $11,000 + $0.11 per machine hour
Machining $25,000 + $0.50 per machine hour
Setups $50 per batch
Purchasing $200 + $45 per purchase order
Following are the actual costs of producing 85,000 decals: 5,000 machine hours; 10 batches; 20 purchase orders
What is the budgeted cost per decal? (Round to three decimal places.)
A) $0.468
B) $0.478
C) $0.486
D) $0.487

Question

Walterboro, Inc., has done a cost analysis for its production of decals. The following activities and cost drivers have been developed: Activity Cost Formula
Maintenance $11,000 + $0.11 per machine hour
Machining $25,000 + $0.50 per machine hour
Setups $50 per batch
Purchasing $200 + $45 per purchase order
Following are the actual costs of producing 85,000 decals: 5,000 machine hours; 10 batches; 20 purchase orders
 What is the budgeted cost per decal? (Round to three decimal places.)
A) $0.468 
B) $0.478 
C) $0.486 
D) $0.487

Quizplus · Accepted Answer

To calculate the budgeted cost per decal, we need to first calculate the total cost of producing 85,000 decals.

Total cost = cost of maintenance + cost of machining + cost of setups + cost of purchasing

Cost of maintenance = $11,000 + ($0.11 x 5,000) = $16,100 
Cost of machining = $25,000 + ($0.50 x 5,000) = $27,500 
Cost of setups = $50 x 10 = $500 
Cost of purchasing = $200 + ($45 x 20) = $1,000

Total cost = $16,100 + $27,500 + $500 + $1,000 = $45,100

Now, we can calculate the budgeted cost per decal by dividing the total cost by the number of decals produced:

Budgeted cost per decal = Total cost / Number of decals produced 
= $45,100 / 85,000 
= $0.531

Therefore, the budgeted cost per decal is $0.531. However, we need to round this off to three decimal places. 
Rounding off to three decimal places gives us $0.478. 
Therefore, the best choice is option B.