Moss Ltd Has the Following Activities: Creating Bills of Materials (BOM)

question 24

Multiple Choice

Moss Ltd. has the following activities: creating bills of materials (BOM) , studying manufacturing capabilities, improving manufacturing processes, training employees, and designing tooling. The general ledger accounts reveal the following expenditures for manufacturing engineering: The equipment is used for two activities: improving processes and designing tooling. Thirty-five percent of the equipment's time is used for improving processes and 65 percent is used for designing tools. The salaries are for two engineers. One is paid £50,000, while the other earns £25,000. The £50,000 engineer spends 40 percent of his time training employees in new processes and 60 percent of his time on improving processes. The remaining engineer spends equal time on all activities. Supplies are consumed in the following proportions:
What is the cost assigned to the creating BOMs activity?

• A) £31,250
• B) £7,500
• C) £43,750
• D) £125,000

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Definitions:

Overhead Costs

Expenses related to the day-to-day running of a business that are not directly linked to the production of goods or services.

Operating Profit

The income generated from the main activities of a company, not including interest and tax expenses.

Markdown

The amount that the price of an item is reduced from the regular selling price.

Invoice

a document issued by a seller to a buyer that specifies the products or services provided and the amount due for payment.