Villanova, Inc Following Are the Actual Costs of Producing 35,000 Rubber Stamps

question 148

Multiple Choice

Villanova, Inc., has done a cost analysis for its production of rubber stamps. The following activities and cost drivers have been developed: $\begin{array} { l l } \text { Activity } & \text { Cost Formula } \\ \text { Design } & \$ 5,000 + \$ 0.05 \text { per machine hour } \\ \text { Machining } & \$ 25,000 + \$ 0.01 \text { per machine hour } \\ \text { Setups } & \$ 35 \text { per batch } \\ \text { Purchasing } & \$ 50 + \$ 15 \text { per purchase order } \end{array}$
Following are the actual costs of producing 35,000 rubber stamps: 1,000 machine hours; 5 batches; 30 purchase orders
$\begin{array} { l r } \text { Design } & \$ 5,080 \\ \text { Machining } & ? \\ \text { Setups } & ? \\ \text { Purchasing } & \$ 600 \end{array}$
The following variances were given in the activity performance report:
$\begin{array} { l r } \text { Design } & ? \\ \text { Machining } & \$ 40 \mathrm {~F} \\ \text { Setups } & \$ 15 \mathrm {~F} \\ \text { Purchasing } & ? \end{array}$ What is the actual cost of setups?

• A)$160
• B)$190
• C)$300
• D)none of these

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Definitions:

Fixed Input

A production factor that remains unchanged regardless of the level of output in the short run.

Marginal Product

The additional output generated by employing one more unit of a particular input, keeping other inputs constant.

Units of Labor

Measurements used to quantify the work input by labor forces, often referring to hours worked or number of workers.

Diminishing Returns

A principle stating that if one input in the production of a commodity is increased while all other inputs are held fixed, a point will eventually be reached at which additions of the input yield progressively smaller, or diminishing, increases in output.