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 total cost for production of 50,000 reflectors that will require 8,000 machine hours, 25 batches, and 15,000 purchase orders?
A) $393,750
B) $933,410
C) $3,937,500
D) $38,410,000

Question

Quizplus · Accepted Answer

The total cost is the sum of the costs for each activity:Maintenance: $15,000 + $4 per machine hour = $15,000 + $4 * 8,000 = $47,000Machining: $35,000 + $1 per machine hour = $35,000 + $1 * 8,000 = $43,000Inspection: $60,000 + $750 per batch = $60,000 + $750 * 25 = $105,000Setups: $1,000 per batch = $1,000 * 25 = $25,000Purchasing: $50,000 + $10 per purchase order = $50,000 + $10 * 15,000 = $200,000Total cost = $47,000 + $43,000 + $105,000 + $25,000 + $200,000 = $393,750