Flowing Wells Corporation Is Preparing Its Annual Budget

Multiple Choice

Flowing Wells Corporation is preparing its annual budget. As part of its analysis of the contribution of individual products to overall profitability, the controller estimates the amount of overhead that should be assigned to the individual product lines. Budgeted inspection costs are $4,800. Additional information is as follows: Small Pumps Large Pumps
Units inspected 120 120
Hours spent inspecting 2.5 17.5
Direct labour hours per unit 2 2
Under a traditional costing system that assigns overhead on the basis of direct labour hours, the inspection costs allocated to one small pump would be:

A) $10
B) $15
C) $20
D) $24