Lynwood,Inc.produces two different products (Product A and Product X)using two different activities: Machining,which uses machine hours as an activity driver,and Inspection,which uses number of batches as an activity driver.The activity rate for Machining is $125 per machine hour,and the activity rate for Inspection is $500 per batch.Usage of the activity drivers are as follows: What is the amount of Inspection cost assigned to Product A?

A)$7,500
B)$22,500
C)$30,000
D)$125,000

Question

Lynwood,Inc.produces two different products (Product A and Product X) using two different activities: Machining,which uses machine hours as an activity driver,and Inspection,which uses number of batches as an activity driver.The activity rate for Machining is $125 per machine hour,and the activity rate for Inspection is $500 per batch.Usage of the activity drivers are as follows: What is the amount of Inspection cost assigned to Product A?

A)$7,500 
B)$22,500 
C)$30,000 
D)$125,000

Quizplus · Accepted Answer

To assign Inspection costs to Product A, we need to multiply the number of batches for Product A by the activity rate for Inspection.

Product A requires 15 batches of inspections: 
- 5 batches for Machining (2 batches per 1,000 machine hours) 
- 10 batches for Inspection (1 batch per 100 units)

Therefore, the total Inspection cost assigned to Product A is: 
15 batches x $500 per batch = $7,500 + $15,000 = $22,500

Therefore, the answer is B.