DeMaris Corp. must calibrate its equipment before each production run. Each calibration costs $3,000. During 2010, DeMaris calibrated its equipment six times and produced 720,000 units of product: 120,000 of Product X in two production runs and 600,000 units of Product Y in four production runs. The calibration cost per unit for X and Y is
Product X &emsp; Product Y
A) $0.050 &emsp; $0.020
B) $0.020 &emsp; $0.050
C) $0.025 &emsp; $0.025
D) $0.025 &emsp; $0.005
E) $0.005 &emsp; $0.025

Question

Quizplus · Accepted Answer

The total calibration cost is $3,000 per calibration times six calibrations, equaling $18,000. For Product X, the calibration cost per unit is $18,000 divided by 720,000 units, then multiplied by the proportion of runs for X (2 out of 6), resulting in $0.050 per unit. For Product Y, it's $18,000 divided by 720,000 units, then multiplied by the proportion of runs for Y (4 out of 6), leading to $0.020 per unit.