Question

Jackson, Inc. produces two different products (Product 5 and Product Z) using two different activities:Machining, which uses machine hours as an activity driver, and Inspection, which uses a number of batches as an activity driver. The cost of Machining is $255,000, while the cost of Inspection is $35,000. Product 5 uses 33% of total machine hours and 65% of total batches.What is the total Inspection cost assigned to Product Z?(a) $12,250(b) $17,500(c) $84,150(d) $170,850

Answer 1

Inspection costs allocated= $12,250

Step-by-step explanation:

Giving the following information:

The cost of Machining is $255,000, while the cost of Inspection is $35,000. Product 5 uses 33% of total machine hours and 65% of total batches.

First, we need to determine the allocation rate of Inspection for Product Z:

Allocation rate Product Z= 1 - Product 5 use of batches

Allocation rate Product Z= 1 - 0.65

Allocation rate Product Z= 0.35

Now, we can allocate Inspection costs:

Inspection costs allocated= 35,000*0.35

Inspection costs allocated= $12,250