ThePinewoodFurnitureCompanyPtyLtdplansto manufacture two lines of chairs in the coming yearlounge and patio. The company isconsideringintroducingan activity-based costing system. Given below are each activity, its cost and its related activity driver.

Activity

Cost

Activity Driver

Material setups

300 000

Number of setups

Material handling

250 000

Number of parts

Cutting

700000

Numberofparts

Assembly

600 000

Direct labour hours

Finishing

450 000

Number of units

Thelevelofactivityfortheyearis:

Lounge

Patio

Units to be produced

10 000

5000

Number of setups

60

60

Number of parts per unit

10

5

Direct labour hours per unit

5

2

Underan activity-based costing system, what is the activity cost per unit of activity driver for machine setups?

Select one:

a.$5000persetup.

b.$2500persetup.

c.$1200persetup.

d.$1667persetup.