Question

Carr Manufacturing makes a product that incurs prime costs of $320,000. Production uses 1,000 setup hours and 1,900 machine hours. Activity rates are $75 per setup hour and $50 per machine hour. Carr's total product cost is: a.$95,000. b.$490,000. c.$320,000. d.$170,000.

Answer 1

Answer:

b. $490,000

Explanation:

Total cost refers to the summation of all costs that is expended during production processes of certain products, which is made up of prime cost, overhead cost, etc.

Total cost = Prime cost + Overhead cost

Where,

Overhead cost = Setup [1,000 × $75 per setup] $75,000 + Machine hours [1,900 × $50 per machine hour] $95,000

Overhead cost = $170,000

Prime cost = $320,000

Therefore,

Total cost = $320,000 + $170,000

Total cost = $49,000