Question

Lions Incorporation produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $170 per machine hour, and the activity rate for Inspection is $510 per batch. The activity drivers are used as follows:
Product A Product X Total
Machine hours 1,900 3,900 5,800
Number of batches 45 22 67

What is the amount of Machining cost assigned to Product X?

a. $780,000
b. $22,500
c. $380,000
d. $950,000

Answer 1

Answer:

Lions Incorporation

The amount of Machining cost assigned to Product X is:

= $663,000.

Explanation:

a) Data and Calculations:

                                          Product A             Product X             Total

Activities used                  Machining             Inspection

Activity driver                    Machine hours     Number of batches

Activity rate                       $170/ mh              $510/ batch

Usage of activity drivers:

Machine hours                 1,900                     3,900                      5,800

Number of batches              45                          22                            67

The amount of Machining cost assigned to Product X:

= 3,900 * $170 = $663,000