Silver Faces, Inc What Is the Budgeted Setup Costs If There Was Production

question 94

Multiple Choice

Silver Faces, Inc., has done a cost analysis for its production of reflectors. The following activities and cost drivers have been developed: $$\begin{array} { l l } \text { Activity } & \text { Cost Formula } \\\text { Maintenance } & \$ 15,000 + \$ 4 \text { per machine hour } \\\text { Machining } & \$ 35,000 + \$ 1 \text { per machine hour } \\\text { Inspection } & \$ 60,000 + \$ 750 \text { per batch } \\\text { Setups } & \$ 1,000 \text { per batch } \\\text { Purchasing } & \$ 50,000 + \$ 10 \text { per purchase order }\end{array}$$ What is the budgeted setup costs if there was production of 50,000 reflectors that will require 8,000 machine hours, 25 batches, and 15,000 purchase orders?

• A)$1,000
• B)$25,000
• C)$8,000,000
• D)$15,000,000

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Definitions:

Intended Use

The purpose for which a product or service is specifically designed or for which it is intended to be used.

Average Total Assets

Average total assets are calculated by taking the sum of total assets at the beginning and end of an accounting period, then dividing by two, used for analyzing a company's asset efficiency.

Net Sales

The amount of sales revenue remaining after deducting sales returns, allowances, and discounts.

Units-Of-Production Method

A depreciation method that allocates an asset's cost based on the number of units it produces, linking the depreciation expense to the actual usage of the asset.