"Louis Diamonds manufactures diamond earrings and pendants. The company uses activitybased
budgeting and has established diamond inspection as one of its cost pools with
number of diamonds used as its cost driver. Inspection supplies for each diamond inspected
are $0.35. For the upcoming year, the company originally believed it would produce and sell
10,000 pendants containing one diamond and 5,000 sets of earrings containing two
diamonds, resulting in the following inspection cost per diamond."
| Salary of inspector || $60,000 |
| Equipment costs || 3000 |
| Inspection supplies || 7000 |
| Total || $70,000 |
| Cost per diamond || $3.50 |
"If the company now believes it will only be able to produce and sell 8,000 pendants (in
addition to the earrings), the inspection cost per set of earrings would be"