Sitwell Corporation manufactures titanium and aluminum tennis racquets. Sitwell’
ID: 2427760 • Letter: S
Question
Sitwell Corporation manufactures titanium and aluminum tennis racquets. Sitwell’s total overhead costs consist of assembly costs and inspection costs. The following information is available: Cost Titanium Aluminum Total Cost Assembly 500 mach. hours 500 mach. hours $45,000 Inspections 350 150 $75,000 2,100 labor hours 1,900 labor hours Sitwell is considering switching from one overhead rate based on labor hours to activity-based costing. Using activity-based costing, how much inspections cost is assigned to titanium racquets? a. $22,500 b. $52,500 c. $37,500 d. $35,625
Explanation / Answer
Solution:
Titanium Aluminium Inspection Cost = 75,000 350 150 Allocation of inspection cost = $ 75,000 / Total inspection * products number of inspection For Titanium, inspection cost = $ 75,000 / 500 * 350 52,500 The answer to the question is b. $ 52,500