Question

A company has two inspectors, each earning a salary of $75,000. One inspector works exclusively on inspecting parts received from outside suppliers, while the other spends 30% of her time inspecting parts and 70% of her time inspecting final products.

How much labor cost should be assigned to the activity, inspecting parts?
a. $100,000
b. $97,500
c. $75,000
d. $96,275
e. $95,000

Answer 1

Option (b) $97,500

Step-by-step explanation:

Data provided in the question:

Salary of each inspector = $75,000

Time spend by one inspector on inspecting parts = 100%

Time spend by other inspector on inspecting parts = 30%

Time spend by other inspector on inspecting final product = 100%

Now,

The labor cost that should be assigned to the activity, inspecting parts is

= 100% of salary of one inspector + 30% of the salary of the other inspector

= $75,000 + ( 30% of $75,000 )

= $75,000 + ( 0.30 × $75,000 )

= $75,000 + $22,500

= $97,500

Option (b) $97,500