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6 September, 21:21

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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  1. 6 September, 22:52
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    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
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