Solo Company has developed cost formulas for the drivers of the following production activities: What is the budgeted inspection cost for 20 setups?
$$\begin{array} { l l r r }
\text { Driver } & \text { Activity } & \text { Fixed } & \text { Variable } \
\text { Labour hours } & \text { Materials } & - 0 - & 40 \
\text { Labour hours } & \text { Labour } & - 0 - & 20 \
\text { Machine hours } & \text { Maintenance } & 20,000 & 16 \
\text { Machine hours } & \text { Machining } & 100,000 & 4 \
\text { Number of setups } & \text { Inspections } & 60,000 & 400 \
\text { Number of setups } & \text { Setups } & - 0 - & 600 \
\text { Number of purchase orders } & \text { Purchasing } & 150,000 & 6
\end{array}$$
A)$60,000
B)$68,000
C)$160,000
D)$330,000

Question

Solo Company has developed cost formulas for the drivers of the following production activities: What is the budgeted inspection cost for 20 setups?
$$\begin{array} { l l r r } 
\text { Driver } & \text { Activity } & \text { Fixed } & \text { Variable } \
\text { Labour hours } & \text { Materials } & - 0 - & 40 \
\text { Labour hours } & \text { Labour } & - 0 - & 20 \
\text { Machine hours } & \text { Maintenance } & 20,000 & 16 \
\text { Machine hours } & \text { Machining } & 100,000 & 4 \
\text { Number of setups } & \text { Inspections } & 60,000 & 400 \
\text { Number of setups } & \text { Setups } & - 0 - & 600 \
\text { Number of purchase orders } & \text { Purchasing } & 150,000 & 6
\end{array}$$
A)$60,000
B)$68,000
C)$160,000
D)$330,000

Quizplus · Accepted Answer

The budgeted inspection cost for 20 setups is calculated by adding the fixed cost to the total variable cost for the given number of setups. The fixed cost for inspections is $60,000, and the variable cost per setup is $400. For 20 setups, the variable cost is 20 setups * $400/setup = $8,000. Therefore, the total budgeted inspection cost is $60,000 (fixed) + $8,000 (variable) = $68,000.

Solo Company Has Developed Cost Formulas for the Drivers of the Following