1. Wilder Company manufactures two models of its banjo, the Basic and the Luxury
ID: 2352795 • Letter: 1
Question
1. Wilder Company manufactures two models of its banjo, the Basic and the Luxury. The Basic model requires 10,000 direct labor hours and the Luxury requires 30,000 direct labor hours. The company produces 3,400 units of the Basic model and 600 units of the Luxury model each year. The company inspects one Basic for every 100 produced, and inspects one Luxury for every 10 produced. The company expects to incur $84,600 of total inspecting costs this year. How much of the inspecting costs should be allocated to the Basic model using ABC costing?a. $21,150
b. $30,600
c. $42,300
d. $71,910
Please show solution. Thank you very much!
Explanation / Answer
Total Insp Cost $84600 The company inspects one Basic for every 100 produced. No produced is 3400. So Total No of Basic Insp = 3400/100 = 34. It inspects one Luxury for every 10 produced. No produced is 600. So Total No of Lux Insp = 600/10 = 60 So Total No of Insp = 34+60 = 94 So Cot per Insp = $84600/94 = $900 So Cost of Insp for Basic model = 34*$900 = $30,600 .............Ans (b)
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