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The traceable fixed and variable costs of the purchasing activity center are $260,000. An analysis of the center's cost behavior showed a fixed cost of $100,000 and the appropriate cost driver to be the number of lines inputted. The total number of lines inputted is 2,000,000.
-What is the overhead cost function for this activity center?
A) Costs = $100,000 + $0.08(lines)
B) Costs = $100,000 + $0.13(lines)
C) Costs = $260,000 + $0.08(lines)
D) Costs = $0.13(lines)

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Quizplus · Accepted Answer

The overhead cost function is determined by identifying the fixed and variable components of the total costs. The fixed cost is given as $100,000. The variable cost can be calculated by subtracting the fixed cost from the total traceable costs ($260,000 - $100,000 = $160,000). To find the variable cost per line, divide the variable cost by the total number of lines inputted ($160,000 / 2,000,000 lines = $0.08 per line). Therefore, the cost function is Costs = $100,000 + $0.08(lines).

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