Jones Manufacturing Has Used Activity Based Costing to Assign Costs

question 135

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,what is the new pool rate for batch inspection costs?

• A)$0
• B)$5
• C)$10.625
• D)$15.525

---

Definitions:

Married-Couple Family

A family structure consisting of two individuals in a legally recognized marriage, with or without children.

Working Mother

A mother who engages in employment or work outside of the home.

Sociologists

Experts who study social behavior and society, emphasizing patterns of social relationships, social interaction, and culture.

Primary Provider

The main entity or individual responsible for supplying a particular service, support, or necessity.