Twista Manufacturing Has the Following Activities and Activity Costs Per

question 1

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 total cost for one unit of Product X is:

• A) $20.10
• B) $18.28
• C) $5.10
• D) $3.28

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Definitions:

World Price

The price of a good that prevails in the world market for that good.

Oil Field

A region with an abundance of oil wells extracting petroleum (crude oil) from below ground.

Capital Income

Income generated from the investment of capital, such as dividends from stocks, interest on loans, or rental income from property.

Output Price

The price at which a product or service is sold, reflecting the market value of the output.