X-TREME Corporation Has the Following Activities: Creating Bills of Materials

question 180

Multiple Choice

X-TREME Corporation has the following activities: creating bills of materials (BOM) , studying manufacturing capabilities, improving manufacturing processes, training employees, and designing tooling. The general ledger accounts reveal the following expenditures for manufacturing engineering: $\begin{array} { l r } \text { Salaries } & \$ 75,000 \\ \text { Equipment } & 40,000 \\ \text { Supplies } & 10,000 \\ \text { Total } & \$ 125,000 \end{array}$
The equipment is used for two activities: improving processes and designing tooling. Thirty-five percent of the equipment's time is used for improving processes and 65 percent is used for designing tools. The salaries are for two engineers. One is paid $\$ 50,000$ , while the other earns $\$ 25,000$ . The $\$ 50,000$ engineer spends 40 percent of his time training employees in new processes and 60 percent of his time on improving processes. The remaining engineer spends equal time on all activities. Supplies are consumed in the following proportions:
$\begin{array} { l l } \text { Creating BOMs } & 25 \% \\ \text { Studying capabilities } & 10 \% \\ \text { Improving processes } & 20 \% \\ \text { Training employees } & 25 \% \\ \text { Designing tooling } & 20 \% \end{array}$ What is the cost assigned to the creating BOMs activity?

• A)$31,250
• B)$43,750
• C)$7,500
• D)$125,000

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