Grace Faces, Inc What Is the Budget for Maintenance If 10,000 Reflectors Were

question 100

Multiple Choice

Grace Faces, Inc., has done a cost analysis for the production of reflectors in its factory. The following activities and cost drivers have been developed: $$\begin{array} { l l } \text { Activity } & \text { Cost Formula } \\\text { Maintenance } & \$ 20,000 + \$ 3 \text { per machine hour } \\\text { Machining } & \$ 40,000 + \$ 2 \text { per machine hour } \\\text { Inspection } & \$ 32,000 + \$ 600 \text { per batch } \\\text { Setups } & \$ 1,200 \text { per batch } \\\text { Purchasing } & \$ 56,000 + \$ 8 \text { per purchase order }\end{array}$$ What is the budget for maintenance if 10,000 reflectors were made that required 2,200 machine hours, 10 batches, and 3,000 purchase orders?

• A)$15,500
• B)$10,250
• C)$26,600
• D)$11,200

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Definitions:

FIFO

First-In, First-Out, an inventory valuation method where goods purchased first are sold first.

Weighted Average

A calculation that takes into account the varying degrees of importance of the numbers in a data set.

Net Realizable Value

The estimated selling price of goods minus the costs of their sale or disposal.

Lower of Cost

An inventory valuation method requiring inventory to be recorded at the lower of its historical cost or current market value.