Attraction Corporation Produces Specially Machined Parts The Costs of Facility-Level Activities Are Assigned Using Machine Hours

question 175

Multiple Choice

Attraction Corporation produces specially machined parts. The parts are produced in batches in one continuous manufacturing process. Each part is custom produced and requires special engineering design activity (based on customer specifications) . Once the design is completed, the equipment can be set up for batch production. Once the batch is completed, a sample is taken and inspected to see if the parts are within the tolerances allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and inspecting. In addition, there is a sustaining process with two activities: providing utilities (plantwide) and providing space. Costs have been assigned to each activity using direct tracing and resource drivers: $$\begin{array}{l}\begin{array} { l r } \text { Engineering } & \$ 1,000,000 \\\text { Setups } & 900,000 \\\text { Machining } & 2,000,000 \\\text { Inspection } & 800,000 \\\text { Providing space } & 250,000 \\\text { Providing utilities } & 180,000\end{array}\\\text { Activity drivers for each activity have been identified and their practical capacities listed: }\\\begin{array} { l r } \text { Machine hours } & 25,000 \\\text { Setups } & 200 \\\text { Engineering hours } & 5,000 \\\text { Inspection hours } & 2,500\end{array}\end{array}$$ The costs of facility-level activities are assigned using machine hours.
What is (are) the product-level activity(ies) ?

• A)engineering
• B)setups
• C)inspecting
• D)all of the above

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Definitions:

Marginal Utility

The additional satisfaction or benefit received from consuming one more unit of a good or service.

Total Utility

The complete satisfaction received from consuming a particular quantity of goods or services.

Consumer's Income

The total amount of money earned by a consumer, influencing their purchasing power and spending behavior.

Equilibrium

A state of balance or stability within a system where opposing forces or influences are equal and cancel each other out.