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:

Ending Inventory

The total value of all unsold goods and materials that a company holds at the end of an accounting period.

Gross Profit on Sales

The difference between sales revenue and the cost of goods sold before deducting overheads, taxes, or interest.

FIFO Retail Inventory Method

An accounting method for valuing inventory where the first items purchased are the first ones to be sold.

Freight-in Charges

The costs associated with transporting inventory to the buyer's location, often included in the cost of goods purchased.