The FSOJ Company Undertakes the Following Activities in Its Production

question 60

Multiple Choice

The FSOJ Company undertakes the following activities in its production operation and incurred the following costs during the first half of 20x2: Harvest apples $25,000
Prepare apples for processing 20,000
Extract juice from apples 18,000
Process juice into apple juice concentrate,
Apple juice or apple cider 30,000
Package completed products 9,000
Processing the juice into 3 final products involves the use of 2 machines, each of which incurred amortization costs of $15,000 for the first half of 20x2. Each product requires a different set up on the processing machines, so FSOJ normally sets up the machines to produce concentrate for the first week of each month. The machine is then set up to produce apple juice for the next 2 weeks. Finally, workers set up the same machines to produce apple cider during the last week of each month.
During the first half of 20x2, 20% of the apples harvested were turned into apple juice concentrate, 50% were processed into apple juice, and 30% became apple cider. The relative sales values of each product were: 75% for apple juice, 20% for apple juice concentrate, and 5% for apple cider. The apple juice concentrate operation takes up 40% of FSOJ's total factory space. Regular apple juice and apple cider occupy 35% and 25%, respectively.
Which of the preceding costs would most likely have "number of setups" as its cost driver?

• A)Harvest apples
• B)Package completed products
• C)Process juice
• D)Extract juice

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Definitions:

Supply Curve

A graphical representation of the relationship between the price of a good or service and the quantity of it that producers are willing and able to supply at that price.

Equilibrium Price

The price at which the quantity of goods supplied equals the quantity of goods demanded in the market, leading to a state of balance.

Economic Theory

A conceptual framework explaining how economies operate, including principles on production, distribution, and consumption of goods and services.

Product Supply

The total amount of a product or service that is available for purchase by consumers at a given price point and time.