If fixed setup costs are $21000 and variable setup costs are $11000, the total setup cost is _________?
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Answer: D. $32,000
Explanation
Total setup cost is computed by adding fixed setup costs to variable setup costs. Summing twenty-one thousand dollars and eleven thousand dollars results in thirty-two thousand dollars. Combining both cost categories provides the complete expense incurred for production setups. Fixed setup costs remain constant regardless of the number of production batches run. Variable setup costs increase proportionally with the frequency of production batch setups. Batch-level costs like setups are crucial for accurate activity-based costing systems.
Manufacturers analyze setup costs to determine optimal production batch sizes and schedules. Activity-based costing assigns setup expenses directly to products consuming batch resources. Controlling setup costs helps companies reduce waste and improve overall manufacturing efficiency. Option A underestimates total setup expenses by suggesting a much lower cost figure. Option B represents an incorrect sum that fails to match the provided cost inputs. Option C drastically understates costs by subtracting instead of adding the values.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
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