Quick Start Engines Has Two Departments, Assembly and Testing $\text { The above activities are used by the two departments as follows: }$

question 60

Multiple Choice

Quick Start Engines has two departments, Assembly and Testing. You are given the following information about the costs of 5 activities that occur at the manufacturing plant monthly: $\begin{array}{lrl}\text { Activity } &\text {Total Costs } &\text { Volume of Cost Driver }\\\hline\text { Material handling } & \$ 100,000 & 200,000 \text { parts } \\\text { Supervision of direct labour } & 105,000 & 70 \text { employees } \\\text { Janitorial and cleaning } & 150,000 & 3,000 \text { hours } \\\text { Machining } & 240,000 & 6,000 \text { machine hours } \\\text { Total costs } & \$595,000 &\end{array}$

$\text { The above activities are used by the two departments as follows: }$
$\begin{array}{lll}&\text { Assembly }&\text {Testing }\\\hline\text { Material handling } & 150,000 \text { parts } & 50,000 \text { parts } \\\text { Supervision of direct labour } & 30 \text { employees } & 40 \text { employees } \\\text { Time spent cleaning } & 2,000 \text { hours } & 1,000 \text { hours } \\\text { Number of machine hours } & 4,000 \text { machine hours } 2,000 \text { machine hours }\end{array}$ How much of the total activity costs will be allocated to Assembly?

• A) $300,000
• B) $275,000
• C) $380,000
• D) $350,000

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Definitions:

Ordering Cost

The total expenses incurred in placing an inventory order, which can include costs for paperwork, communication, transportation, and handling.

Holding Cost

The expenses associated with storing unsold goods or materials, including warehousing, insurance, depreciation, and opportunity costs.

Optimal Order Quantity

Refers to the quantity of inventory that minimizes the total costs of inventory management, including ordering and holding costs.

Holding Costs

The expenses associated with storing inventory before it is sold, including warehousing, insurance, depreciation, and opportunity costs.