Xylon Corp. has contracts to complete weekly supplements required by forty-six customers. For the year 2018, manufacturing overhead cost estimates total $940,000 for an annual production capacity of 10 million pages.
For 2018, Xylon decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis:

During 2018, two customers, Money Managers and Hospital Systems, are expected to use the following printing services:

Under ABC costing, what is the inspection cost allocated to Hospital Systems?
A) $704
B) $80
C) $286
D) $6,574

Question

Xylon Corp. has contracts to complete weekly supplements required by forty-six customers. For the year 2018, manufacturing overhead cost estimates total $940,000 for an annual production capacity of 10 million pages.
For 2018, Xylon decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis:

During 2018, two customers, Money Managers and Hospital Systems, are expected to use the following printing services:

Under ABC costing, what is the inspection cost allocated to Hospital Systems?
A) $704 
B) $80 
C) $286 
D) $6,574

Quizplus · Accepted Answer

Inspection cost = ($88,000 ÷ 8,000 inspections) × 64 = $704