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 Inspection cost assigned to Product 5?
A)$7,500
B)$22,500
C)$125,000
D)$375,000

Question

Quizplus · Accepted Answer

To assign the inspection cost to Product 5, we need to find the proportion of batches used by Product 5. Since Product 5 uses 75% of total batches, we can assume that it will also incur 75% of the total inspection cost.

Total Inspection cost = $30,000
Proportion of Inspection cost assigned to Product 5 = 75%
Inspection cost assigned to Product 5 = 75% x $30,000 = $22,500

Therefore, the total Inspection cost assigned to Product 5 is $22,500.