Walterboro, Inc., has done a cost analysis for its production of decals. The following activities and cost drivers have been developed: Following are the actual costs of producing 85,000 decals: 5,000 machine hours; 10 batches; 20 purchase orders
What is the budgeted cost per decal? (Round to three decimal places.)
A) $0.468
B) $0.478
C) $0.486
D) $0.487

Question

Walterboro, Inc., has done a cost analysis for its production of decals. The following activities and cost drivers have been developed:  Following are the actual costs of producing 85,000 decals: 5,000 machine hours; 10 batches; 20 purchase orders
 What is the budgeted cost per decal? (Round to three decimal places.)
A) $0.468 
B) $0.478 
C) $0.486 
D) $0.487

Quizplus · Accepted Answer

To calculate the budgeted cost per decal, we need to first allocate the actual costs to the cost drivers.

Machine hours cost: $62,500 / 5,000 machine hours = $12.50 per machine hour
Batch cost: $20,000 / 10 batches = $2,000 per batch
Purchase order cost: $30,000 / 20 purchase orders = $1,500 per purchase order

Next, we can use the cost drivers to determine the cost per decal:

Total machine hours for 85,000 decals = (85,000 decals / 3 decals per machine hour) = 28,333.33 machine hours.

($12.50 per machine hour x 28,333.33 machine hours) + ($2,000 per batch x 10 batches) + ($1,500 per purchase order x 20 purchase orders) = $467,833.33

Budgeted cost per decal = Total cost / Total number of decals produced 
= $467,833.33 / 85,000 decals 
= $0.478 per decal.

Therefore, the best choice is B, with the calculated budgeted cost per decal being $0.478.