Mertz, SA, Has Done a Cost Analysis for Its Production of of Flags

Essay

Mertz, SA., has done a cost analysis for its production of flags. The following activities and cost drivers have been developed: $\begin{array}{ll}\text { Activity } & \text { Cost Formula } \\\text { Maintenance } & £ 13,000+£ 2 \text { per machine hour } \\\text { Machining } & £ 45,000+£ 6 \text { per machine hour } \\\text { Inspection } & £ 70,000+£ 500 \text { per batch } \\\text { Setups } & £ 2,000 \text { per batch } \\\text { Purchasing } & £ 80,000+£ 150 \text { per purchase order }\end{array}$ Following are the actual costs of producing 75,000 flags:
1,000 machine hours; 15 batches; 10 purchase orders $\begin{array}{lr}\text { Maintenance } & £ 14,000 \\\text { Machining } & 50,000 \\\text { Inspection } & 70,000 \\\text { Setups } & 32,000 \\\text { Purchasing } & 82,000\end{array}$