Try-Us-First Motors Manufactures and Sells Off-Road Vehicles

Multiple Choice

Try-Us-First Motors manufactures and sells off-road vehicles.The September sales were $6,000,000.Monthly design costs are $112,000 and rework is running at $75,000 per month.Its painting department is fully automated and requires substantial inspection to keep the machines operating properly.An improperly painted vehicle is very expensive to correct, and inspection hours for the 8,000 vehicles painted in September totaled 2,000 hours by 14 employees, who earn an average of $28 an hour.Ten litres of paint were used on average for each vehicle.The standard amount of paint per vehicle is nine litres.The cost of inspection for September was equal to the budgeted amount of $56,000.What are appraisal costs as a percentage of sales?

A) 0.93%
B) 1.25%
C) 1.87%
D) 2.20%
E) 2.80%