Wilder Manufacturing manufactures two models of its banjo, the Basic and the Lux

Question

Wilder Manufacturing 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 $56,400 of total inspecting costs this year. How much of the inspecting costs should be allocated to the Basic model using ABC costing?

Explanation / Answer

NO OF UNITS INSPECTED OF BASIC = 3400/100 = 34 AND OF LUXURY = 600/10 = 60 BASIC INSPECTION COST = (56400/94)* 34 = 19749 Rs

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