Newman Company Recently Installed an Activity-Based Relational Database -Refer to the Figure

question 96

Multiple Choice

Newman Company recently installed an activity-based relational database. Using the information contained in the activity relational table, the following pool rates were computed:
$400 per purchase order
$24 per machine hour, Process 1
$30 per machine hour, Process 2
$80 per engineering hour

Two products are produced by Special Products: X and Y. The plant has two manufacturing processes, Process 1 and Process 2. Other processes include engineering, product handling, and procurement. Product X goes through Process 1 while Product Y goes through Process 2. The product relational table for Special Products is as follows:
$\begin{array}{llr} &\text {Product X:}\\& \text {Activity Driver \# and Name}&\text { Activity Usage }\\1 & \text { Units } & 200,000 \\2 & \text { Purchase orders } & 250 \\3 & \text { Machine hours } & 80,000 \\4 & \text { Engineering hours } & 1,250\end{array}$



$\begin{array}{llc} &\text {Product X:}\\& \text {Activity Driver \# and Name}&\text { Activity Usage }\\1 & \text { Units } & 25,000 \\2 & \text { Purchase orders } & 125 \\3 & \text { Machine hours } & 10,000 \\4 & \text { Engineering hours } & 1,500\end{array}$
-Refer to the figure.How much engineering overhead cost will be assigned to Product Y using engineering hours?

• A)$100,000
• B)$120,000
• C)$801,000
• D)$2,000,000

---

Definitions:

Curvilinear

Pertains to something shaped or moving in curved lines.

Relevant Range

The range of activity within which the assumptions about fixed and variable cost behaviors hold true.

High-Low Method

An accounting method used to estimate the fixed and variable components of a cost based on the highest and lowest levels of activity.

Variable Maintenance Cost

Costs that change in proportion to the operational activity of a company, such as repairs and maintenance expenses that vary with usage.