ABX Company Produces Two Types of Computer Speakers Required:
1)Allocate the Inspection Cost Between the Two Products,assuming the Is

question 91

Essay

ABX Company produces two types of computer speakers.The Prestige line is made to provide excellent sound for the most demanding applications.The Standard line is geared toward workplace use and delivers average performance.During its most recent accounting period,the company incurred $50,000 of inspection costs.Its production activities were classified into four cost centers,unit-level,batch-level,product-level,and facility-level.The following cost and cost driver information is provided for the unit-level and batch-level cost centers:
$$\begin{array} { | l | r |r | } \hline \text { Cost-Center: } & \text { Unit-Level } & \text { Batch-Level } \\\hline \text { Cost Driver: } & \text { Number of direct labor hours } & \text { Number of batches } \\\hline \text { Prestige Product } & 4,000 & 15 \\\hline \text { Standard Product } & \underline { 6,000 } & \underline { 5 } \\\hline{ \text { Totals } } & \underline { 10,000 } & \underline { 20 } \\\hline & & \\\hline\end{array}$$ Required:
1)Allocate the inspection cost between the two products,assuming the inspection cost is driven by a)only unit-level activities; b)only batch-level activities.
2)How should managers of the company determine which allocation is more appropriate?

---

Definitions:

Semi-Annually

Occurring or calculated twice a year, often used in the context of interest payments or other financial assessments.

Face Value

The nominal or stated value of a bond, share of stock, or other financial instruments, typically used as a reference for calculating interest, dividends, or premiums.

Coupon Bond

A debt security that pays the holder a fixed interest rate (coupon) over the bond's life, with the principal amount repaid at maturity.

Market Interest Rates

The prevailing rate of interest available in the marketplace for securities, loans, and deposits, determined by supply and demand dynamics.