Jefferson, Inc. produces two different products (Product 5 and Product Z) 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 $185,600, while the cost of Inspection is $33,500. The activity drivers are used as follows: Product 5Product ZTotal Machine hours1,8563,9445,800 Number of batches452267 What proportion of Machining activity is used by Product Z?

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16 January, 08:33

Jefferson, Inc. produces two different products (Product 5 and Product Z) 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 $185,600, while the cost of Inspection is $33,500. The activity drivers are used as follows: Product 5Product ZTotal Machine hours1,8563,9445,800 Number of batches452267 What proportion of Machining activity is used by Product Z?

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Answers (1)

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Renee Cole · Answer 1

Proportion product Z (Machining) = 68%

Explanation:

Giving the following information:

Machining uses machine hours as an activity driver.

The cost of Machining is $185,600

Machine hours:

Product 5 = 1,856

Product Z = 3,944

Total Machine hours = 5,800

To calculate the proportion of Machining for product Z, we need to divide the machine-hours used by the total machine-hours

Proportion product Z = 3,944/5,800 = 0.68 = 68%

If you have to allocate the machining costs to Product Z:

Machining costs = 0.68*185,600 = $126,208