Newby Company Uses an Activity-Based Costing System $\begin{array}{ll}\text { Fixed costs per month } & \$ 240,000 \\\text { Variable cost per setup } & \$ 5,400\end{array}$

question 41

Multiple Choice

Newby Company uses an activity-based costing system. Four activities have been identified. The setup activity uses the number of setups as its cost driver. The following budget information is available for this activity:
The company expects to perform 25 setups in June. $\begin{array}{ll}\text { Fixed costs per month } & \$ 240,000 \\\text { Variable cost per setup } & \$ 5,400\end{array}$
-Refer to the Figure.Suppose the company expects 25 setups in June.What would be the total budgeted costs of the setup activity?

• A)$135,000
• B)$240,000
• C)$375,000
• D)$397,500

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Definitions:

Sales Revenue

The total amount of money generated from the sale of goods or services before any expenses are subtracted.

Financial Leverage

The use of borrowed funds to increase the potential return of an investment, amplifying both gains and losses.

Earnings Per Share (EPS)

A financial ratio that measures the portion of a company's profit allocated to each outstanding share of common stock.

EBIT

EBIT stands for earnings before interest and taxes, and it's a measure of a firm's profit that includes all expenses except interest and income tax expenses.