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?

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Definitions:

Required Reserves

The minimum amount of funds that a bank must hold in reserve against specified deposit liabilities.

Actual Reserves

Actual reserves refer to the total amount of funds that a bank has on deposit at the Federal Reserve bank of its district, plus its vault cash, constituting its total legal reserves.

Fiscal Policy

Governmental policies regarding taxation and spending to influence the economy.

Negative Excess Reserves

A situation where a bank has less reserves than the minimum required reserve, indicating a potential liquidity problem.