US CMA Part 1 · Chapter 2 · Question 21 of 30
Using activity-based budgeting, a plant plans to run 120 production batches next year. Each batch requires 2 machine setups, and each setup consumes resources costing $425. What is the budgeted cost of the setup activity?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) $102,000
Explanation
Activity-based budgeting starts from the planned volume of the activity driver. Setups = 120 batches x 2 = 240 setups. Budgeted cost = 240 x $425 = $102,000.
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