Jones Manufacturing Has Used Activity Based Costing to Assign Costs

question 88

Multiple Choice

Jones manufacturing has used activity based costing to assign costs to Models X and Y as given in the table below:
$\begin{array}{lrr}& \text { ModelX } & \text { ModelY } \\\text { Units produced } & 24,000 & 30,000 \\\text { Machine hours } & 7,500 & 8,500 \\\text { Direct labour hours } & 8,000 & 12,000 \\\text { Material handling (number of moves) } & 4,000 & 6,000 \\\text { Setups } & 5,000 & 7,000 \\\text { Purchase orders } & 30 & 40 \\\text { nspections } & 10,000 & 14,000 \\\text { Product line variatinns. } & 8 & 12\end{array}$
The following overhead costs are reported for the following activities of the production process:
$\begin{array}{lr}\text { Material handling } & \$ 40,000 \\\text { Labour-related overhead } & 120,000 \\\text { Setups } & 60,000 \\\text { Product design } & 100,000 \\\text { Batch inspections } & 120,000 \\\text { Central purchasing } & 70,000\end{array}$ Jones manufacturing has used activity based costing to assign costs to Models X and Y as given in the table below:
$\begin{array}{|l|r|r|r|r|r|r|r|r|}\hline\text { Activity } & \text { Cost } & & \text { Pool } & \text { Model } & \text { Model X } & \text { Model } & \text { Model Y } \\&\text { Pool } & \text { Driver } & \text { Rate } & \text { X }& \text { Cost } & \text { Y } & \text { Cost } & \text { Total } \\&&&&\text { Activity } & & \text { Activity } & &\\\hline \begin{array}{l}\text { Material } \\\text { handling }\end{array} & \$ 40,000 & 10,000 & \$ 4 & 4,000 & \$ 16,000 & 6,000 & \$ 24,000 & \$ 40,000 \\\hline \begin{array}{l}\text { Labour- } \\\text { related } \\\text { overhead }\end{array} & \$ 120,000 & 20,000 & \$ 6 & 8,000 & \$ 48,000 & 12,000 & \$ 72,000 & \$ 120,000 \\\hline \text { Setups } & \$ 60,000 & 12,000 & \$ 5 & 5,000 & \$ 25,000 & 7,000 & \$ 35,000 & \$ 60,000 \\\hline \begin{array}{l}\text { Product } \\\text { design }\end{array} & \$ 100,000 & 20 & \$ 5,000 & 8 & \$ 40,000 & 12 & \$ 60,000 & \$ 100,000 \\\hline \begin{array}{l}\text { Batch } \\\text { inspections }\end{array} & \$ 120,000 & 24,000 & \$ 5 & 10,000 & \$ 50,000 & 14,000 & \$ 70,000 & \$ 120,000 \\\hline \begin{array}{l}\text { Central } \\\text { purchasing }\end{array} & \$ 70,000 & 70 & \$ 1,000 & 30 & \$ 30,000 & 40 & \$ 40,000 & \$ 70,000 \\\hline \text { Total } & & & & & \$ 209,000 & & \$ 301,000 & \$ 510,000\\\hline\end{array}$ Jones Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment.
-Refer to the figure.Under this new approach using the new rates,what labour cost is assigned to Model X in this approximately relevant ABC system?

• A)$60,000
• B)$102,000
• C)$153,000
• D)$225,000

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Definitions:

Productivity

The efficiency with which individuals, businesses, or economies produce goods or services, often measured as output per unit of input.

Dexterity

Skill in performing tasks, especially with the hands, indicating coordination, precision, and speed in manual operations.

Correlation

A statistical measure that describes the extent to which two variables change together, but not necessarily causally.

pH

A scale used to specify the acidity or basicity of an aqueous solution, with values ranging from 0 to 14.