Twista Manufacturing Has the Following Activities and Activity Costs Per

question 7

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.
The forklifting costs and machine set up costs allocated to Product X are:

• A) $2400 and $4000.
• B) $5000 and $9000.
• C) $2400 and $5000.
• D) $5000 and $4000.

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Definitions:

Willingness To Pay

The maximum amount an individual is prepared to spend to acquire a good or service or avoid something undesirable.

Expected Revenue

The average amount of money a company anticipates receiving over a specific period based on probable sales or services provided.

Probability

A measure of the likelihood that an event will occur, often expressed as a number between 0 and 1.

Reservation Price

The maximum price a consumer is willing to pay for a good or service, beyond which they would rather do without it.