Twista Manufacturing Has the Following Activities and Activity Costs Per

question 29

Multiple Choice

Twista Manufacturing has the following activities and activity costs per year: Machining ($20 000) ; Forklifting ($10 000) ; machine setup ($32 000) , and quality inspection ($40 000) . The operation starts with setting up the machines; each batch of products requires a different setup. This is followed by machining, where the cost of machining varies directly with the number of machine hours. Forklifts are used to move the work in progress around. Because quality is important, an inspection is carried out for each batch of products.
The following information is also available:
Number of machine hours per year: 20 000 machine hours
Number of forklift moves per year: 500 moves
Number of batches per year: 4000 batches
Each year, Twista Manufacturing produces 5000 units of Product X. These units of Product X require 5000 machine hours, 120 moves and 500 batches to produce. The direct materials and direct labour together cost $15 per unit of Product X.
Which of the following are the correct activity rates for machining and quality inspection?

• A) $1 per machine hour and $2 per machine hour.
• B) $5 per batch and $10 per batch.
• C) $2400 and $5000.
• D) $1 per machine hour, and $10 per batch.

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Definitions:

Inelastic

Describing demand or supply that is relatively unresponsive to changes in price, meaning the quantity demanded or supplied changes by a smaller percentage than the change in price.

Output Level

The quantity of goods or services produced by a business or economy during a specific period.

Revenue Curves

Graphical representations that show how a firm's revenue changes in response to changes in price, holding other factors constant.

Total Revenue

The overall amount of money earned by a company from the sale of its goods or services, calculated as the price per unit times the number of units sold.