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Application rate for the material-handling activity

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Reference no: EM13861205

Cool Appliance manufactures three types of remote-control devices: Economy, Standard, and Deluxe.  The company, which uses activity-based costing, has identified five activities (and related cost drivers).  Each activity, its budgeted cost, and related cost driver is identified below.

Activity

 

Cost

Cost Driver

Material handling

$   225,000

 

Number of parts

Material insertion

2,475,000

 

Number of parts

Automated machinery

840,000

 

Machine hours

Finishing

170,000

 

Direct labor hours

Packaging

     170,000

 

Orders shipped

Total

$3,880,000

 

 

The following information pertains to the three product lines for next year:

 

Economy

Standard

Deluxe

Units to be produced

10,000

5,000

2,000

Orders to be shipped

  1,000

   500

   200

Number of parts per unit

   10

 15

 25

Machine hours per unit

 1

   3

   5

Labor hours per unit

 2

   2

   2

1. What is Cool Appliance's cost application rate for the material-handling activity?

A. $1.00 per part.

B. $2.25 per part.

C. $6.62 per labor hour.

D. $13.23 per part.

E. A rate other than those listed above.

2. What is Cool Appliance's cost application rate for the automated machinery activity?

A. $24.00 per machine hour.

B. $24.50 per labor hour.

C. $49.42 per unit.

D. $50.00 per machine hour.

E. A rate other than those listed above.

Reference no: EM13861205

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