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Reynoso Corporation manufactures titanium and aluminum tennis racquets. Reynoso’s total overhead costs consist of assembly costs and inspection costs. The following information is available: Cost Titanium Aluminum Total Cost Assembly 500 mach. hours 500 mach. hours $27000 Inspections 350 150 $80000 2100 labor hours 1900 labor hours Reynoso is considering switching from one overhead rate based on labor hours to activity-based costing. Using activity-based costing, how much inspections cost is assigned to titanium racquets
Reynoso Corporation manufactures titanium and aluminum tennis racquets. Reynoso’s total overhead costs consist of assembly costs and inspection costs. The following information is available: Cost Titanium Aluminum Total Cost Assembly 500 mach. hours 500 mach. hours $27000 Inspections 350 150 $80000 2100 labor hours 1900 labor hours Reynoso is considering switching from one overhead rate based on labor hours to activity-based costing. Using activity-based costing, how much inspections cost is assigned to titanium racquets
Answer:The inspections cost is assigned to titanium racquets is $56,000Explanation:For computing the inspection cost for titanium racquets, we have to compute the per inspection cost which is shown below:Per inspection cost = (Total inspections cost ÷ total cost)= {$80,000 ÷ (350 + 150)}= 160 per inspection costNow the inspection cost equals to= Titanium cost × per inspection cost= 350 × 160= $56,000...
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