The Xiang Plant Has Two Categories of Overhead: Maintenance and Inspection

question 36

Multiple Choice

The Xiang plant has two categories of overhead: maintenance and inspection. Costs expected for these categories for the coming year are as follows:
The plant currently applies overhead using direct labour hours and expected capacity of 50,000 direct labour hours. The following data have been assembled for use in developing a bid for a proposed job:
Total expected machine hours for all jobs during the year is 25,000, and the total expected number of inspections is 1,500.
Using activity-based costing and the appropriate activity drivers, the total cost of the potential job would be

• A) £1,200.
• B) £1,800.
• C) £3,700.
• D) £3,875.

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Definitions:

Mixers

Devices used for blending ingredients together, commonly found in cooking, baking, and cocktail making.

Diseconomies of Scale

A condition in which a firm’s average costs increase as production increases.

Returns to Scale

The change in output as a result of proportionately changing all inputs in the production process, indicating increasing, constant, or decreasing returns.

Marginal Cost

An uplift in the sum total of costs incurred by producing another unit of a product or service.