Question relating to Absorption Costing

11. The Inground Sprinkler Supply sells sprinkler systems suited for large or small yards. The company has decided to adopt an activity-based costing system. Last year the company incurred $1,000,000 in overhead costs related to the following activities: Activity Allocation Base Overhead Cost Purchasing number of purchase orders $ 350,000 Material handling number of shipments received 200,000 Quality inspection number of inspections 450,000 The activities for large and small yard systems were as follows: Large Small purchase orders 15,000 20,000 shipments received 7,500 12,500 inspections 11,500 11,000 If a customer requested a bid on a specially designed sprinkler that would probably require four inspections, how much quality inspection overhead would you include in the bid? a. $ 0 b. $40 c. $80 d. $120. e. $160. The answer sheet states (c) $80 as the answer. Can you please explain?