Silver Faces, Inc., has done a cost analysis for its production of reflectors. The following activities and cost drivers have been developed: Activity Cost Formula
Maintenance $15,000 + $4 per machine hour
Machining $35,000 + $1 per machine hour
Inspection $60,000 + $750 per batch
Setups $1,000 per batch
Purchasing $50,000 + $10 per purchase order
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?
A) $47,000
B) $43,000
C) $38,410,000
D) none of these

Question

Quizplus · Accepted Answer

Machining cost = $35,000 + ($1 x 8,000 machine hours) = $43,000
The other cost drivers (batches and purchase orders) are not relevant to calculating the machining cost.