Cottonwood, Inc. produces two different products (Standard and Luxury) using two
ID: 2498184 • Letter: C
Question
Cottonwood, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $156,000, while the cost of Inspection is $40,500. Standard uses 20% of total machine hours and 70% of total batches. What is the total activity cost assigned to Luxury?
$59,550
$12,150
$136,950
$124,800
Cottonwood, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $156,000, while the cost of Inspection is $40,500. Standard uses 20% of total machine hours and 70% of total batches. What is the total activity cost assigned to Luxury?
Explanation / Answer
Total Cost assigned to Luxury = (156000*80%) + (40500*30%) = $136,950