6) Washington, Inc. produces two different products (Product C and Product 2) us

Question

6)

Washington, Inc. produces two different products (Product C and Product 2) 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 cost of Machining is $682,000, while the cost of Inspection is $41,870. Usage of the activity drivers are as follows:

$230 per machine hour

$155 per machine hour

$525 per machine hour

$220 per machine hour

   Product C Product 2 Total   Machine hours 1,300      3,100      4,400       Number of batches 55      24      79    

Explanation / Answer

The activity rate  for Machining = The cost of Machining / Total  machine hours

= $ 682,000 / 4,400 Machine Hours

= $ 155 per machine hour

Hence, the correct answer is $ 155 per machine hour

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