Reference no: EM132667396

XAG-B company is reviewing the behavior of its various activities. XAG is currently the company uses a plant-wide rate for allocating manufacturing overhead.

The plant manager believes it is time to refine the method of cost allocation and has the accounting department identify the primary production activities and their cost drivers:

Activities                Cost driver                   Allocation Rate
Material handling     Number of parts               $2 per part
Assembly               Labor hours                  $20 per hour
Inspection         Time at inspection station     $3 per minute

The current traditional cost method allocates overhead based on direct manufacturing labor hours using a rate of $200 per labor hour.

Problem 1: What are the indirect manufacturing costs per remote control assuming an activity-based-costing method is used and a batch of 50 remote controls are produced? The batch requires 100 parts, 6 direct manufacturing labor hours, and 2.5 minutes of inspection time.

Select one:

a. $4.00 per remote control
b. $24.00 per remote control
c. $6.55 per remote control
d. $327.50 per remote control