Jackson,Inc.produces two different products (Product 5 and Product Z)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 cost of Machining is $500,000,while the cost of Inspection is $30,000.Product 5 uses 20% of total machine hours and 75% of total batches.What is the total Machining cost assigned to Product 5?
A)$7,500
B)$22,500
C)$100,000
D)$375,000

Question

Quizplus · Accepted Answer

Since Product 5 uses 20% of the total machine hours, we can allocate $500,000 x 20% = $100,000 to Product 5 for Machining costs. The percentage of batches used by Product Z is not given, but we know that Product 5 uses 75% of the total batches. Therefore, we can allocate $30,000 x 75% = $22,500 to Product 5 for Inspection costs. The total Machining cost assigned to Product 5 is $100,000.