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  • 1.  may you discusse this question

    Posted 02-07-2019 02:17 AM
    Question: 15 A company manufactures diamond earrings and pendants. The company uses activity-based budgeting and has established diamond inspection as one of its cost pools with number of diamonds used as its cost driver. Inspection supplies for each diamond inspected are $0.35. For the upcoming year, the company originally believed it would produce and sell 10,000 pendants containing one diamond and 5,000 sets of earrings containing two diamonds, resulting in the following inspection cost per diamond.
    Salary of inspector
    $60,000
    Equipment costs
    3,000
    Inspection supplies
    7,000
    Total
    $70,000
    Cost per diamond
    $    3.50
    If the company now believes it will only be able to produce and sell 8,000 pendants (in addition to the earrings), the inspection cost per set of earrings would be


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    Yazan Tayeh
    Unemployed
    Amman
    Jordan
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  • 2.  RE: may you discusse this question

    Posted 02-08-2019 03:18 AM
    Hello Yazan,

    I believe there are a couple of ways to get to the correct answer. Here is  my answer that follows the same path to calculate inspection cost per diamond as the original when 10,000 pendants were sold. 
    Question: 15 A company manufactures diamond earrings and pendants. The company uses activity-based budgeting and has established diamond inspection as one of its cost pools with number of diamonds used as its cost driver. Inspection supplies for each diamond inspected are $0.35. For the upcoming year, the company originally believed it would produce and sell 10,000 pendants containing one diamond and 5,000 sets of earrings containing two diamonds, resulting in the following inspection cost per diamond.
    Salary of inspector
    $60,000
    Equipment costs
    3,000
    Inspection supplies
    7,000
    Total
    $70,000
    Cost per diamond
    $    3.50
    If the company now believes it will only be able to produce and sell 8,000 pendants (in addition to the earrings), the inspection cost per set of earrings would be

    Answer: 
    Salary of inspector
    $60,000
    (unchanged)

    Equipment costs
    3,000
    (unchanged)

    Inspection Supply cost =  $6,300

    $.35 x 18,000 = 6,300

    Total Inspection Cost = $60,000 + $3,000 + $6,300 = $69,300

    $69,300 / 18,000

    Cost per Diamond = $3.85

    Total cost per set of earrings $7.70


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    Lou Tablante
    Supervisor
    Lake Forest CA
    United States
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    Original Message